GENERAL   HISTORY 

OJ.     Jill 

MOST  PROMINENT   I3ANKS  UN    UUROPE: 

PARTICULARITY  TUB  BANK:-  u* 

ENGLAND  AND  FRANCE, 

THE 

RISE  AND  PROGRESS  OF  THE  BANK  OF  NORTH  AMERICA; 

A  KULL  HISTORY  OF  THK 

LATE  AND  PRESENT  BANK  OF  THE  UNITED  STATES: 

TO  WHICH  It  ADDED, 

A  STATISTICAL  AND  COMPARATIVE  VIEW 

OF    TIIL 

MONEYED   INSTITUTIONS   OF   NEW   YORK, 

AND  TWENTY-FOUR  OTH1CR 

PRINCIPAL  CITIES  OF  THE  UNITED  STATES. 

Compiled  from  various  standard  works,  official  sources,  aiid  private  correspondence. 

ALSO, 

A.  HAMILTON'S  REPORT  TO  CONGRESS  ON  CURRENCY, 

Presented  while  Secretary  :  and 
AloBUFFIE'S  REPORT  ON  CURRENCY, 

Presented  to  the  last  Congress. 


BY  THOMAS  H.  GODDARD, 

ACCOUNTANT.  • 


NEW  YORK 

H.  0.  SLEIGHT,  CLINTON  HALL, 

G.  &  C.  &  H.  CARVILL,  108  BROADWAY. 

1831. 


Southern  District  of  New  York,  ss. 

BE  IT  REMEMBERED,  that  on  the  twenty  fifth  day  of  January,  A.  D. 
1831,  in  the  fifty-firth  year  of  the  independence  of  the  United  States  of 
America,  Thomas  H.  Goddard,  of  the  said  district,  hath  deposited  in  this 
office  the  title  of  a  book,  the  right  whereof  lie  claims  as  author  and  pro- 
prietor, in  the  words  following,  to  wit : 

"  A  general  history  of  the  most  prominent  banks  in  Europe  ;  particu- 
larly the  banks  of  England  and  France :  the  rise  and  progress  of  the 
bank  of  North  America :  a  full  history  of  the  late  and  present  bank  of 
the  United  States.  To  which  is  added,  a  statistical  and  comparative  view  of  the  mo- 
neyed institutions  of  New  York,  and  twenty-four  of  the  principal  cities  of  the  United 
States.  Compiled  from  various  standard  works,  official  sources,  and  private  correspon- 
dence- Also,  A.  Hamilton's  Report  to  Congress  on  Currency,  presented  while  Secretary : 
McDuffie's  Report  of  Currency,  presented  to  the  last  Congress.  By  Thomas  H.  God- 
dard, Accountant." 

In  conformity  to  the  act  of  congress  of  the  United  States,  entitled  "  An  act  for  the 
encouragement  of  learning,  by  securing  the  copies  of  maps,  charts,  and  books,  to  the  au- 
thors and  proprietors  of  such  copies,  during  the  time  therein  mentioned  ;"  And  also 
to  an  act  entitled  "  An  act  supplementary  to  an  act  entitled  '  An  act  for  the  encourage- 
ment of  learning,  by  securing  the  copies  of  maps,  charts,  and  books,  to  the  authors  and 
proprietors  of  such  copies,  during  the  times  therein  mentioned,'  and  extending  the  benefits 
thereof  to  the  arts  of  designing,  engraving,  and  etching  historical  and  other  prints." 

FREDERICK  J .  BETTS, 
Clerk  of  the  Snvthern  District  of  JVc*,  York 


ADVERTISEMENT 


IN  tliis  work  the  author  does  not  aim  at  originality,  or  to 
give  a  learned  dissertation  on  the  multiform  principles,  or 
complex  science,  of  banking.  This  has  been  done  effectu- 
ally by  more  competent  hands.  But  his  whole  object  is  to 
give  a  plain  business  statement  of  things  as  they  have  been, 
and  are :  to  trace  the  rise  and  progress  of  important  mo- 
neyed institutions,  and  show  what  effects  they  have  pro- 
duced upon  commerce,  upon  arts,  upon  agriculture,  and  upon 
society  in  general,  and  the  beneficial  results  upon  each,  when 
properly  managed :  and  to  delineate  the  deleterious  conse- 
quences they  are  capable  of,  and  necessarily  do  produce, 
when  intrusted  to  unskillful  agents. 

The  facts  adduced  have  been  drawn  from  different  ency- 
clopedias, and  other  authorities  equally  valuable ;  and  during 
the  investigation,  reference  has  been  made  to  every  source 
within  his  reach,  which  could  in  any  way  elucidate  the  sub- 
ject. The  Bank  of  England,  having  been  continued  by 
prudent  hands,  standing  alone,  has  sustained  itself,  and  al- 
most or  quite  sustained  the  government,  for  a  period  of  nearly 
a  century  and  a  half,  down  to  the  present  day:  while  that 
of  France,  having  been  taken  into  the  hands  of  government, 
was  ruined,  and  almost  prostrated  the  government  itself. 


IV 


ADVERTISEMENT. 


The  history  of  the  institutions  of  our  own  country  will  be 
found  to  contain  important  facts,  hitherto  locked  up  in  pon- 
derous folios,  and  consequently  accessible  to  but  few.  The 
learned  and  able  report  of  the  immortal  Hamilton,  presented 
to  congress  shortly  after  the  formation  of  the  government, 
together  with  the  luminous  report  on  currencies  presented  to 
the  last  congress  by  Mr.  McDuffie,  form  an  aggregate  state- 
ment of  statistical  information  not  to  be  found  in  any  other 
work  extant. 


CONTENTS 


PAGE 

Banks,  definition  of, 9 

Bank  of  Venice, 10 

"     of  Genoa,       .                                           ...  11 

"      of  Amsterdam,        .......  12 

"      of  England  established, 15 

Charter  renewed, 17 

Advances  to  government  1776,  and  charter  again  renewed,  18 

Charter  renewed  in  1800, 19 

Amount  of  circulation,             .....  19 

Bank  of  France  established, 20  j 

Changed  to  a  government  establishment,         .        .  21 

Company  of  the  West,            22 

Senegal  Company, 22 

General  receipt  of  the  king's  revenue  transferred,   .  23 

Restriction  of  specie  and  plate,       ....  24 

Bank  notes  reduced  in  value,           ....  25 

Bank  failed, 25 

New  Bank  of  France, 27 

Banking  system  of  Scotland, 28 

Private  Provincial  Banks, 41 

Bank  of  North  America, 48 

A.  Hamilton's  Report  on  Currency,          ....  51 

Late  United  States  Bank, 94 

Present  United  States  Bank,             98 

Report  of  the  present  Bank  of  the  United  States,     .        .  99 

Exposition  of                      ditto, 106 

McDuffie's  Report, 129 

Statistical  and  comparative  view  of  the  moneyed  institu- 
tions of  the  United  States,       .  182 
New  York  City  Banks,             .        .         .        .         .        .  185 

Delaware  and  Hudson  Canal,          ....  186 

Marine  Insurance,            ......  193 

Fire  Insurance, 194 

Other  Institutions,           ......  195 

Progress  of  stocks  in  New  York  City,     .        .        .  196 


CONTENTS. 


PAGE 

Albany,                            Banks,  197 

Insurance,    ,        .  198 

Troy.                              Banks, 199 

New  Haven.                   Banks,         .  200 

Insurance,            ....  200 

Hartford,  Conn.              Banks, 201 

New  London.                  Banks  and  Insurance,           .         .  202 

Newport,  R.  L                Banks, 203 

Providence.                     Banks  and  Insurance,           .        .  204 

Boston,  Mass.                 Banks, 205 

Insurance,            ....  206 

Salem.                            Banks  and  Insurance,                    .  208 

Portland.                         Banks  and  Insurance,  209 

Portsmouth,  N.  H.         Banks, 210 

New  Jersey.  Banks, 

Philadelphia.  Banks, 

Insurance,            ....  213 

Baltimore.                       Banks, 214 

Insurance,            ....  215 

District  of  Columbia.     Banks,  &c 216 

Richmond,  Va.               Banks,  &c.           ....  217 

Norfolk.                          Banks,  &c 218 

Charleston.                     Banks,  &c 219 

North  Carolina.              Banks,                  ....  220 

Augusta.                         Banks,  &c.           ....  221 

Savannah.                      Banks,  &c.           ....  222 

New  Orleans.                 Banks, 223 

Insurance,            ....  224 

Grand  Recapitulation,      .  225 

Elements  of  Exchange,            229 

Description  of  British  Stocks, 249 


ERRATUM. 

Page  252,  tenth  line  from  the  top,  for  "  This  stock  (six 
millions),'1  read  "  This  stock  (eight  millions)." 


HISTORY 

or 

BANKING   INSTITUTIONS 

OF 

EUROPE  AND  THE  UNITED  STATES 


BANKS. 


IN  commercial  language  a  bank  is  a  repository,  or  an  es- 
tablishment, for  the  purpose  of  receiving  the  money  of  indi- 
viduals ;  either  to  keep  it  in  security,  or  to  improve  it  by  traf- 
ficking in  goods,  bullion,  or  bills  of  exchange  ;  and  it  may 
be  either  of  a  public  or  of  a  private  nature.  A  public  bank 
is  generally  regulated  by  certain  laws,  enacted  by  the  govern- 
ment of  the  state,  which  constitute  its  charter,  limit  its  capi- 
tal, and  establish  the  rules  by  which  it  is  to  conduct  business. 
A  private  bank,  on  the  other  hand,  is  merely  a  contract 
among  individuals,  for  carrying  on  a  trade  in  money  and 
bills  ;  and  the  responsibility  of  the  partners  is  the  only  secu- 
rity of  those  who  transact  business  with  it. 

Banks  are  properly  commercial  institutions,  which,  by  af- 
fording credits,  or  issuing  notes,  as  the  representative  of 
money,  enable  merchants,  with  greater  facility,  to  buy  and 
sell  commodities,  at  home  or  abroad.  The  produce  of  one 
country  is  thus  exchanged  with  that  of  another,  by  means  of 
a  medium,  to  which  an  ideal  value  is  attached  ;  hence  the 
great  utility  of  banking  establishments,  in  all  commercial 
countries.  Among  the  ancients  the  term  banker  implied 
something  different  from  its  modern  signification,  and  con- 
veyed an  idea  corresponding  with  the  profession  of  an  agent, 
broker,  or  money  lender.  Bankers  were  called  Argentarii 
and  Numularii,  by  the  Romans  ;  and  they  loaned  out  the 
money  of  private  persons  on  interest ;  wrote  the  necessary 
deeds,  and  assisted  in  buying  and  selling  all  kinds  of  pro- 


10  BANK  OF  VENICE. 

perty.  The  first  establishment  of  banking,  in  a  regular  and 
systematic  form,  took  place  at  Venice  about  the  middle  of  the 
twelfth  century ;  and  it  arose  from  the  necessities  of  the 
state.  Duke  Vitale,  Mitchel  II.,  being  involved  in  expensive 
wars  with  the  empire  of  the  west,  and  the  Grecian  Manuel, 
embarrassed  the  finances  of  the  republic ;  and  to  relieve  it 
from  the  pressure  of  its  difficulties,  he  had  recourse  to  a 
forced  loan,  the  contributors  to  which  were  made  creditors, 
and  received  interest,  at  the  rate  of  four  per  cent,  per  annum. 
The  Chamber  of  Loans  was  established  for  the  manage- 
ment of  this  fund,  and  regular  payment  of  the  interest: 
which,  gradually  improving  its  plan,  at  last  formed  itself  into 
the  more  perfect  institution  of  THE  BANK  OF  VENICE, 
This  celebrated  bank  has  served  as  a  model  to  almost  every 
similar  establishment  in  succeeding  ages  ;  its 

capital  was  5,000,000  ducats,  or  $4,800#00, 
for  which  the  republic  is  security.  It  is,  properly,  a  board  of 
deposit,  credit,  and  interest.  By  an  edict  of  the  state,  all 
payments  of  wholesale  merchandise,  and  bills  of  exchange, 
must  be  made  in  banco,  or  bank  notes  ;  and  all  debtors  must 
lodge  their  money  in  the  bank,  that  their  creditors  may  re- 
ceive payment  in  banco  ;  which  is  done  by  transferring  the 
amount  from  the  one  to  that  of  the  other,  or  by  writing  off 
the  sum  from  the  account  of  the  debtor,  and  placing  it  to  that 
of  the  creditor.  Payments  are  made  in  this  manner  without 
the  intervention  of  gold  or  silver  ;  but  there  are  exceptions 
to  this  rule  in  cases  of  retail  trade,  or  when  foreigners  wish 
to  carry  off  the  precious  metals.  All  the  riches  of  the  state 
thus  flowed  into  the  bank  ;  and,  through  various  channels, 
were  again  diffused  among  traders,  to  give  activity  to  the  ex- 
tensive commerce  of  this  once  opulent,  and  powerful  city. 
From  its  good  faith,  and  the  regularity  of  its  transactions, 
the  bank  of  Venice  has  always  maintained  a  high  character 
in  Europe,  and  on  some  occasions,  its  obligations  have  been 
more  esteemed  than  the  bonds  of  kings. 


JJAXK  OP  ST.  GEORGE.  I  1 

During  two  centuries  and  a  half  the  bank  of  Venice  was 
unrivalled  ;  for  so  gradual  is  the  progress  of  improvement, 
that  human  knowledge  is  only  matured  by  the  experience  of 
ages — and  it  was  not  until  the  year  1401,  that  the  magis- 
trates of  Barcelona  established  a  bank  in  that  city.  It  was 
called  the  Table  of  Exchange,  and  was  properly  a  bank  of 
exchange  and  deposit.  Foreign  bills  were  negotiated  with 
the  same  liberality  as  those  of  the  citizens,  and  accommoda- 
tions were  extended  to  strangers  as  well  as  to  natives.  It 
was  altogether  calculated  for  the  encouragement  of  both  ex- 
ternal and  internal  commerce,  and  the  funds  of  the  city  were 
pledged  as  security  for  the  responsibility  of  the  bank. 

In  the  year  1407,  the  bank  of  Genoa  commenced ;  but 
previous  to  this  time,  the  republic  borrowed  large  sums  of 
money  from  the  citizens,  assigning  certain  branches  of  the 
revenue  for  the  payment  of  the  interest,  and  a  board  of  ma- 
nagement, composed  of  the  most  respectable  citizens,  was 
appointed  to  conduct  the  loans,  pay  the  interest,  and  account 
to  government  for  the  funds  intrusted  to  its  care.  From  this 
circumstance,  the  Genoese  claim  the  merit  of  establishing  a 
bank  as  early  as  the  Venetians ;  but  it  is  evident  that  the 
transactions  of  this  board  were  only  an  approximation  to 
bankiu  r-  In  process  of  time,  however,  the  multiplicity  and 
extent  of  these  funds  induced  disorder  and  confusion,  and  it 
was  deemed  expedient  to  consolidate  the  whole  into  one  ca- 
pital stock,  to  be  managed  by  a  bank  called  the  CHAMBER 
OF  ST.  GEORGE,  to  be  governed  by  eight  protectors,  annually 
chosen,  elected  by  the  creditors  and  stockholders.  Under 
this  form  of  government,  the  affairs  of  the  bank  were  prospe- 
rously conducted ;  but  the  further  increase  of  the  public 
debts,  the  accessions  of  towns  and  territories,  among  which 
was  the  little  kingdom  of  Corsica,  made  the  business  of  the 
bank  much  more  complex ;  and  the  inconvenience  of  an- 
nual successions  of  new  protectors  becoming  apparent,  deter- 
mined the  Genoese,  in  the  year  1444.  to  elect  eight  new 


BAMi  OF  AMSTERDAM. 

governors  for  the  management  of  the  bank,  of  which  only 
two  were  to  go  out  every  year. 

Before  the  discovery  of  the  passage  to  the  Indias,  by  the 
Cape  of  Good  Hope,  the  Venetians  enjoyed  a  monopoly  of 
the  lucrative  trade  of  the  east,  by  means  of  the  Mamelukes  of 
Egypt,  with  whom  they  were  leagued  by  policy  and  inter- 
est, which  diffused  oppulence  and  wealth  throughout  Italy. 
This  extensive  commerce  created  and  gave  circulation  to  bills 
of  exchange,  the  credit  and  currency  of  which  were  univer- 
sally acknowledged  when  they  bore  the  signature  of  the 
banks  of  Italy,  and  for  several  centuries  there  were  no  other 
establishments  of  the  kind  in  Europe. 

The  BANK  OF  AMSTERDAM  was  established  on  the  31st  of 
January,  1609.  The  magistrates  of  the  city,  under  autho- 
rity of  the  states,  declared  themselves  the  perpetual  cashiers 
of  the  inhabitants,  and  that  all  payments  above  600  gilders, 
but  afterwards  reduced  to  300,  and  bills  of  exchange,  shall 
be  made  in  the  bank ;  which  obliged  merchants  to  open  ac- 
counts with  it  for  the  payment  of  their  foreign  bills.  The 
extensive  commerce  of  Amsterdam  involved  such  *ti  variety 
of  transactions,  that  the  expediency  of  regulating  them  be- 
came evident,  and  no  measure  could  more  effectually  secure 
property,  check  lawsuits,  and  prevent  frauds,  than  the  esta- 
blishment of  a  bank  office,  in  which  all  receipts  and  pay- 
ments were  registered  in  books  kept  open  for  the  purpose. 

Dr.  Smith  ascribes  the  origin  of  this  bank  to  the  debased 
state  of  the  current  coin  which  the  trade  of  Amsterdam 
brought  from  all  quarters  of  Europe,  and  which  was  sold  at  a 
reduction  of  nine  per  cent,  below  the  money  of  the  mint. 
Merchants,  in  such  cases,  could  not  always  find  standard 
money  to  pay  bills  of  exchange,  the  value  of  which  was  al- 
ways uncertain ;  and  accordingly  operated  against  the 
United  Provinces  with  foreign  nations.  But  as  the  bank  re- 
ceived the  debased,  light,  or  worn  coin,  at  its  intrinsic  value, 
HI  the  good  money  of  the  country,  and  gave  credit  for  the 
Amount  in  its  books,  an  invariable  standard  was  thus  esta- 


BANK  OP  AMSTERDAM.  13 

blished,  that  tended  greatly  to  simplify  and  facilitate  the  ope- 
rations of  commerce.  The  beneficial  effects  of  this  establish- 
ment in  Holland  were  soon  perceived,  and  bank  money  im- 
mediately bore  a  premium,  or  agio,  which  is  a  term  to  denote 
the  diiference  of  price  between  the  money  of  the  bank  and 
the  coin  of  the  country.  When  we  consider  that  coin  is  only 
a  representative  of  commodities,  and  that  its  utility  arises 
only  from  its  being  a  generally  acknowledged  standard  of 
value,  by  which  m  inkind  in  the  civilized  state  of  society  are 
enabled  to  calculate  the  price  of  articles  of%xchange,  it  is  not 
surprising  that  bank  receipts,  which  repr  sent  property  also, 
and  at  the  same  time  not  liable  to  risk,  danger,  or  deteri- 
oration of  any  kind,  should  be  held  in  higher  estimation  than 
coin,  which  is  exposed  to  robbery,  and  all  sorts  of  casualties. 

In  all  countries,  w'lere  banks  have  been  regular  in  their 
transactions,  and  their  responsibility  undoubted,  their  paper 
has  carried  a  premium,  more  or  less,  according  to  circum- 
stances, and  the  agio  of  Amsterdam  was  generally  about  five 
per  cent. 

The  amount,  of  capital  of  the  bank  of  Amsterdam  was 
never  exactly  ascertained.  It  was  originally  constituted  by 
deposits  of  coin,  and  there  was  full  value  in  its  coffers  for  all 
the  credits  and  receipts  it  issued.  The  bank,  however,  gave 
credit  and  receipts  also  upon  deposits  of  gold  and  silver  bul- 
lion, at  the  rate  of  five  per  cent,  less  than  the  mint  price  of 
such  bullion,  which  was  restored  to  the  owner  if  he  called  for 
it  within  six  months,  upon  paying  one  fourth  per  cent,  ii  the 
deposit  was  in  silver,  or  one  half  per  cent,  if  in  gold.  But  if 
the  term  of  six  months  was  allowed  to  expire,  the  bank  re- 
tained the  bullion  at  the  price  stated  in  its  books. 

The  advantage  of  making  deposits  in  this  bank  is  two- 
fold :  first,  the  credit  enables  the  merchant  to  pay  his  bills  of 
exchange  ;  second,  the  receipt  gives  him  an  opportunity  of 
selling  his  bullion  at  an  advance  price,  if  the  market  should 
fluctuate  in  his  favor.  Although  none  can  draw  out  bul- 
lion without  producing  a  receipt,  and  reassigning  bank  money 


14  BANK  OF  AMSTERDAM. 

eqnal  to  the  price  at  which  the  hullion  had  been  received,  yet 
it  is  not  absolutely  necessary  that  both  credit  and  receipt 
should  always  remain  in  the  hands  of  the  same  person  ; 
as  he  who  has  the  receipt  will  find  bank  money  to  buy  at 
the  market  price,  to  enable  him  to  relieve  the  bullion,  and 
the  owner  of  the  credit  will  at  all  times  find  receipts  in  abun- 
dance ;  but  to  prevent  any  extraordinary  rise  in  the  price  of 
bank  money,  or  receipts,  which  speculation  or  other  causes 
might  sometimes  induce,  the  bank  adopted  the  resolution  of 
selling  bank  morfcy  for  the  current  coin,  at  an  agio  of  five  per 
cent.,  and  buying  it  at  the  rate  of  four. 

The  city  is  guaranty  that  there  shall  always  be  full  value 
in  the  bank  to  answer  all  its  demands  ;  and  as  the  directors, 
who  are  annually  changed,  compare  the  treasure  with  the 
books,  under  solemn  oath  ;  so  that  there  can  be  no  probability 
of  fraud. . 

The  four  reigning  burgomasters  are  invested  with  the  di- 
rection of  the  bank,  and  the  city  of  Amsterdam  derives  a 
considerable  revenue  from  it,  which  arises  from  the  following 
sources :  for  all  deposits,  a  fourth  or  half  per  cent,  must  be 
paid ;  from  every  person  who  opens  an  account,  a  fee  of  ten 
gilders  is  exacted,  and  for  every  additional  account,  three 
gilders  three  stivers  ;  for  every  transfer,  two  stivers,  or  six 
stivers  if  the  transfer  be  less  than  three  hundred  gilders.  If 
any  person  shall  overdraw  his  account,  he  is^fined  three  per 
cent,  on  the  amount,  and  his  order  is  set  aside.  There  is 
also  a  considerable  profit  on  the  sale  of  foreign  coin,  or  bul- 
lion, which  is  always  kept  till  it  can  be  sold  to  advantage ; 
and  likewise  by  selling  bank  money,  at  five  per  cent.  agio, 
and  buying  it  at  four.  Through  these  various  resources,  the 
bank  of  Amsterdam  became  rich  and  prosperous,  and  it  was 
supposed  to  retain  in  its  repositories  more  gold  and  silver  than 
any  other  establishment  of  the  kind  in  Europe.* 


15 


BANK  OF  ENGLAND, 

CHARTERED  IN  THE  YEAR  1694. 

Previous  to  the  year  1694  there  were  only  four  considera- 
ble banks  in  Europe  ;  but  on  the  27th  July,  of  that  year,  a 
charter  w;«s  granted  by  William  and  Mary,  for  establishing  the 
bank  of  England  ;  which,  for  opulence,  and  extent  of  circu- 
lation, is  now  the  greatest  in  the  world.  *The  charter  was 
granted  for  the  term  of  twelve  years,  and  the  corporation  was 
deterrninable  on  a  year's  notice.  The  original  capital,  sub- 
scribed by  the  proprietors, 

was  £1,200,000  sterling,  or  $5,333,333^ 
iai  consideration  of  loaning  to  the  government  the  same  sum, 
£1,200,000  ;  for  which  they  received  an  interest  of  eight 
per  cent,  amounting  to  $426,666f . 

By  an  act  of  parliament,  in  the  8th  and  9th  of  William, 
they  were  allowed  to  enlarge  their 

capital  stock  to  £2,201,171.10,  or  $9,782,984.44. 

At  this  time  the  bank  agreed  to  deliver  up  to  the  govern- 
ment, so  many  exchequer  bills  as 

amounted  to  £2,0005000  or  $8,888,888.88. 
and  to  accept  an  annuity  therefor,  of  the 

sum  of  £100,000,  or  $444,444.44. 

The  bank  then  agreed  to  lend  to  government,  by  contract, 
on  demand,  £1,000,000,  or  $4,444,444.44. 

In  order  to  enable  them  to  circulate  exchequer  bills,  they 
established  what  is  now  called  bank  circulation  ;  the  nature 
of  which  may  be  understood  by  what  follows  :  The  compa- 
ny of  the  bank  are  obliged  to  keep  cash  in  hand,  sufficient,  not 
only  to  answer  their  common,  but  also  any  extraordinary  de- 
mand that  may  be  made  upon  them  ;  and  what  they  have 
over  they  employ  in  the  trade  of  the  company.  But  when  the 
bank  entered  into  the  above  contract,  as  they  did  not  keep 
unemployed  a  larger  sum  of  money  than  what  they  deemed 


16  BANK  OF  ENGLAND. 

necessary  to  answer  their  ordinary  demands,  they  could  not 
conveniently  take  out  of  their  current  cash,  so  large  a  sum 
as  a  million,  without  embarrassment ;  they  therefore  in- 
vented the  following1,  which  answered  all  the  purposes,  and 
shows  the  profound  financial  skill  with  which  they  managed  : 

They  opened  a  subscription  for  a  million,  which  they  re- 
new annually  ;  wherein  the  subscribers  advance  ten  per  cent, 
and  enter  into  a  contract  to  pay  the  remainder,  or  any  part 
thereof,  whenever  the  bank  shall  call  upon  them,  under  pe- 
nalty of  forfeiture.of  the  ten  per  cent,  so  advanced.  In  con- 
sideration of  which,  the  bank  pays  the  subscribers  4  percent, 
interest,  for  the  money  paid  in ;  and  j  per  cent,  for  the  whole 
sum  they  agree  to  furnish  ;  and  in  case  a  call  should  be  made 
upon  them  for  the  whole,  or  any  part  thereof,  the  bank  fur- 
ther agrees  to  pay  them  at  the  rate  of  5  per  cent,  per  annum 
for  such  sum,  until  paid  ;  which  they  are  under  obligation  to 
do,  at  the  end  of  the  year.  By  this  means,  the  bank  obtains 
all  the  purposes  of  keeping  a  million  of  money  by  them  j 
and  the  subscribers,  if  no  call  is  made  upon  them,  (which  is 
in  general  the  case,)  receive  6|  per  cent,  for  the  money  ad- 
vanced ;  yet  the  company  gains  £23,500  by  the  contract : 
as  will  appear  by  the  following  account,  viz : 

The  bank  receives  from  the  government,  for  the  advance 
of  a  million,  £30,000  ;  and  they  pay  the  subscribers,  who  ad- 
vance £100,000  and  agree  to  pay,  when  called  upon, 
£900,000  more — £6,500;  making  a  clear  gain  to  the  bank 

of  £23,500,  or  $104,444.44. 

Bank  stock  may  not  improperly  be  called  a  trading  stock, 
since  with  this  they  deal  largely  in  foreign  gold  and  silver, 
and  in  discounting  bills  of  exchange ;  besides  which,  they 
are  allowed  by  the  government  large  sums  annually  for  the 
management  of  the  annuities  paid  at  their  office. 

In  terms  of  the  act  of  7  An.ie,  chapter  7,  the  bank  ad- 
vanced on  the  original  annuity,  £100,000,  the 

sum  of  £400.000,  or  $1,777,777.7  7 

And  there  had  been  paid  into  the  exchequer,  in  all,  £1,600,000, 
Tn  pursuance  of  the  same  act,  the  bank  cancelled  exchequer 


BANK  OF  ENGLAND.  17 

bills  to  the  amount  of  £1,755,027.17.101,  or  $7,800,123.96, 
at  6  per  cent,  interest,  and  was  allowed  to  double  its  capital. 

In  the  year  1708,  the  advances  to  the  government  amount- 
ed to  £3,375,027.17.10*,  or  $15,000,123.96, 
and  the  capital  of  the  bank  now  is  £4,402,343  00  00 
In  1709  there  was  paid  in  656,204  01     9 
In  1710  there  was  paid  in                           501,448  12  11 


So  that  the  capital  is  now  £5,559,995  14  08 

or  $24,700,092.11. 

By  the  3d  of  George  1,  chapter  8,  the  bank  cancelled 
£2,000,000  of  exchequer  bills,  which  made  the  advances  to 
government  £5,375,027.17.10^,  or  $23,889,012.84. 

By  the  8th  of  George  1,  chapter  21,  the  bank  purchased 
South  Sea  Company  stock  £4,000,000,  or  $17,777,777.77. 

To  enable  the  bank  to  effect  this  purchase,  it  increased 
its  capital  by  subscription,  in  the  year  1722,  £3,400,000,  and 
at  this  time  the  bank  had  advanced  to  the  state,  in  various 
ways,  in  all  £9,375,027.17.10^  or  $41,666,790.62 ; 

though  its  capital  stock  was 

only  £8,959,995.14.8,  or  $39,822,203.22. 

Thus  it  appears  by  this  statement,  that  the  bank  had  ad- 
vanced a  larger  sum  to  the  state  than  the  whole  amount  of 
its  capital,  on  which  it  paid  a  dividend  to  the  proprietors,  and 
this  circumstance  shows  that  the  bank  possessed  an  undivided 
capital,  which  had  accumulated  from  its  establishment, 
which  is  the  fact ;  and  it  has  continued  to  have  an  undivided 
capital  ever  since  ;  for  in  the  year  1746,  the  bank  had  ad- 
vanced to  government,  on  different  occasions, 

the  sum  of  £11,686,800,  or  $51,941,333.33, 
and  the  capital  on  which  it  had  divided  had  been  raised  by 
several  calls,  to  £10,780,000,  or  $47,911,111.11. 

In  pursuance  of  the  4th  George  3,  chapter  25,  the  bank 
paid  to  government,  for  the  renewal  of  its  charter, 

the  sum  of  £110,000,  or  $488,888.88. 
3 


18  BANK  OF  ENGLAND. 

At  the  same  time  it  advanced  towards  the  supplies  on  ex- 
chequer bills  £1,000,000,  or  $4,444,444.44, 
to  be  paid  in  the  year  1766. 

The  charter  was  then  renewed  to  the  year  1786,  and  the 
dividend  in  1767  was  raised  to  5£  percent,,  which  on  its  now 
capital  amounts  to  $2,635,111.10. 

Soon  after  the  establishment  of  the  bank,  it  assisted  go- 
vernment, in  anticipation  of  the  land  and  malt  taxes,  and 
also  by  advances  on  exchequer  bills,  and  other  securities. 

In  1781,  the  advances  in  this  way  amounted  to  £8,000,000, 
in  addition  to  the  permanent  debt  of  £11,686,800, 

making  in  all  £19,686,800,  or  $87,496,888.88. 

On  condition  of  advancing  £2,000,000,  or  $8,888,888.88, 
on  exchequer  bills,  at  3  per  cent,  interest,  to  be  paid  off  from 
the  sinking  fund  within  three  years,  the  bank  obtained  an 
extension  of  its  charter  to  the  year  1812. 

To  enable  it  to  make  good,  this  advance,  a  call  was  made 
of  eight  per  cent,  on  its  capital;  which  was  now 

increased  to  £11,642,400,  or  $51,744,444; 
and  the  dividend  settled  at  6  per  cent., 

amounting  to  $3,104,646; 

and  the  total  advance  to  government,  on  the  land  and  malt 
taxes,  and  exchequer  bills, 

amounted  to  £9,991,678,  or  $44,407,457.77 ; 
but  in  1786,  the  sum  was 

reduced  to  £6,634,872,  or  $29,488,320 ; 
and  from  thence,  to  1793,  the  amount  of  these  advances 
have  fluctuated,  from  seven  to  nine  millions. 

In  1788,  the  dividend  was  raised  to  7  per  cent.,  which  con- 
tinued to  be  the  rate  until  1807.  The  dividend,  from  1767,  to 
1787,  inclusive,  at  51  per  cent,  per  annum, 

is  $56,868,880 ; 

and  from  1788  to  1807,  both  inclusive,  at  7  per  cent,  per 
annum,  is  $72,442,220. 


BANK  OP  ENGLAND.  19 

In  the  year  1800,  the  charter  was  renewed,  by  the  40th 
George  3,  chapter  28  ;  and  continued  to  1835,  on  condition 
of  advancing  to  the  public  service 

£3,000,000,  or  $13,333,333.33. 

without  interest,  for  six  years,  ending  in  1806.  In  that  year, 
it  was  stipulated,  by  46  George  3,  chapter  4,  that  these  three 
millions  should  remain  with  the  public,  until  six  months  after 
,1  definitive  treaty  of  peace,  at  three  per  cent,  interest,  during 
the  war ;  which  is  a  present  to  the  nation, 

of  £60,000,  or  $266,666.66, 

and  which  shows  the  resources,  and  profitable  trade  of  the 
bank  of  England. 

The  circulation  of  the  notes  of  this  bank,  in  the  years 

1787  was  £  8,688,570,  or  $38,615,866.66 
1790  was     10,217,360,  or    45,410,488.88 

1795  was     13,539,160,  or     60,174,044.44 

1796  was     11,030,010,  or    49,022,711.11 

1805  was  18,397,880,  or  81,768,355.55 

1806  was  17,093,570,  or  75,971,422.22 

1807  was  16,621,390,  or  73,872,844.44 
1810  was  21,000,000,  or  93,333,333.33 

In  1797  the  bank  suspended  specie  payments ;  and  an  act 
was  passed  for  that  purpose  ;  which  suspension  was  renewed 
annually. 

From  the  report  of  a  committee,  appointed  in  this  year,  to 
inquire  into  the  state  of  the  bank,  the  total  credits  were 

£17,597,293,  or  $78,210,191.10. 
The  debt  owing  by  government 

£13,770,390,  or  $61,201,733.33. 
Thus  leaving  a  balance  in  favor  of  the  bank, 

£3,826,903,  or  $17,008,457.77. 

Since  that  time  the  profits  of  the  bank  have  been  consi- 
derably augmented ;  and  the  proprietors  have  received  bo- 
nuses, in  addition  to  7  per  cent. ;  but,  in  April,  1807,  the 
permanent  dividend  was  fixed  at  10  per  cent,  per  annum  ; 
which,  for  twenty-two  years,  up  to  1829,  inclusive, 

is  $113,837,768. 


20  BANK  OF  FRANCE. 

Thus  has  this  wonderful  institution  withstood  the  ravages 
of  time  ! — the  convulsions  of  nations  ! — the  wreck  of  em- 
pires ! — the  vicissitudes  of  war  and  peace  ! — diffusing  life, 
light,  and  heat,  throughout  the  immense  regions  of  the  body 
politic,  from  age  to  age,  down  to  the  present  day !  And  its  sta- 
bility is  now  believed  to  be  commensurate  with  the  British 
empire. 

From  the  above  well  managed  and  prosperous  institution, 
we  will  now  turn  our  eyes  to  a  rival  institution,  nearly  si- 
multaneous in  its  origin  ;  which  bid  fair  to  supersede  its  com- 
petitor ;  and,  for  a  time,  outvied  it  in  the  magnitude  of  its 
operations,  and  the  splendor  of  its  achievements  ;  but,  in  a 
few  short  years,  from  bad  management,  exploded  ;  spread- 
ing devastation  and  horror  in  its  progress ;  convulsing  the 
nation  to  its  centre  ;  and  had  well  nigh  sapped  the  vitals  of 
the  throne. 


BANK   OF    FRANCE, 

CHARTERED  IN  THE  YEAR  1716. 

The  French  nation,  though  less  enterprising  than  the 
English,  in  every  thing  relative  to  commerce,  have  yet,  in 
some  respects,  successfully  imitated  them.  But,  in  the  par- 
ticular instance  of  banking,  they  have  not  been  so  fortunate  ; 
owing,  more  to  causes  connected  with  their  political  institu- 
tions, than  to  any  want  of  knowledge,  genius,  or  activity  in 
the  people. 

In  the  year  1716  a  bank  was  established  in  Paris,  by  the 
celebrated  John  Law,  of  Lauriston.  The  object  of  this  bank, 
according  to  Mr.  Law's  professions,  was  to  increase  the  circu- 
lation of  money ; 

To  put  a  stop  to  the  progress  of  usury  ; 

To  facilitate  the  exchange  between  Paris  and  the  pro- 
vinces ; 

Augment  the  circulation  of  manufactures  ; 


BANK  OP  FRANCE.  21 

And  to  enable  the  people  to  pay,  the  more  easily,  the  heavy 
taxes  to  which  they  were  subjected. 

The  letters  patent,  establishing  this  bank,  stipulated,  that 
the  stock  should  consist  of  1200  shares,  of  5,000  livres 
each,  at  the  rate  of  40  livres  the  mark  ;  so  that  each  share 
was  worth  £250  sterling,  and  the  whole  stock  of  the  bank 
at  £300,000  sterling,  or  $1,333,333.33. 

The  regulations  of  this  bank  were  wise  and  salutary.  It 
was  declared,  that  the  bank  securities  belonging  to,  as  well 
as  the  money  lodged  by  foreigners,  should  not  be  subject  to 
confiscation,  even  in  case  of  war  with  the  nations  to  which 
the  proprietors  belonged. 

The  bank,  of  which  Mr.  Law  and  his  brother  William 
were  the  proprietors,  assumed  the  firm  of  THE  GENERAL 
BANK  OF  LAW  &  COMPANY;  and  the  affairs  of  the  bank 
were  so  prosperous,  that,  at  a  general  meeting,  on  the  20th 
December,  1717,  a  dividend  was  declared  of  7Jper  cent.,  for 
six  months,  amounting  to  $100,000. 

There  can  be  no  doubt,  but  this  bank  would  soon  have  ri- 
valled that  of  Amsterdam,  or  of  England,  and  produced  con- 
sequences equally  beneficial  to  France  :  but  the  strong  arm 
of  power  interfered,  and  changed  the  institution  from  a  pri- 
vate, to  a  public  concern. 

By  an  edict  of  council,  bearing  date  the  4th  December, 
1718,  the  public  were  informed,  that  his  majesty  had  taken 
Mr.  Law's  bank  into  his  own  hands,  under  the  name  of  THE 
ROYAL  BANK  ;  of  which,  Mr.  Law  was  appointed  dkector 
general ;  and  branches  were  established  in  different  cities. 

The  bank  now  proceeded  on  public  credit,  or  in  other 
words,  was  entirely  dependent  on  the  will  of  the  sovereign; 
and  as  the  schemes  of  monarchs  are  seldom  guided  by  mo- 
deration or  reason,  it  embraced  objects  so  magnificent,'so  vast, 
and  extensive,  that  all  Europe  looked  on  with  anxiety,  and 
trembled  for  the  issue  ! 

It  was  proposed  to  vest  the  whole  privileges,  effects,  and 
possessions  of  foreign  trading  companies,  the  Great  Farms, 


22  BANK  OF   FRANCE. 

the  mint,  the  general  receipt  of  the  king's  revenues,  and  the 
management  and  property  of  the  bank,  in  one  great  com- 
party ;  which,  having  in  their  hands  all  the  trade,  taxes, 
and  royal  revenues  of  the  kingdom,  might  multiply  the  notes 
of  the  bank  to  any  extent  they  pleased. 

Accordingly,  a  company  was  formed  in  1717,  under  the 
name  of  THE  COMPANY  OF  THE  WEST,  to  which  was 
granted  the  province  of  Louisiana,  and  from  this  circumstance, 
the  operations  of  the  company  obtained  the  name  of  the 
MISSISSIPPI  SYSTEM. 

Of  this  company  200,000  shares  were  issued,  at  the  rate 
of  500  livres  each, 

amounting  to  100,000,000  livres,  or  $18,750,000. 

On  the  4th  September,  1718,  THE  FARM  OF  TOBACCO 
was  made  over  to  the  Company  of  the  West,  on  their  agree- 
ing to  pay  to  the  king  rent  in  advance, 

2,020,000  livres,  or  $378,750. 

On  the  15th  December  following,  they  obtained  the  charter 
and  effects  of  the  SENEGAL  COMPANY;  but  the  most  important 
grant  they  obtained,  was  in  May,  1719,  when  an  edict  was 
published,  transferring  to  them  the  exclusive  privilege  of 
trading  to  the  East  Indies,  China,  and  the  South  seas,  on 
condition  of  paying  the  lawful  debts  of  these  companies,  now 
dissolved.  On  this  condition,  the  Company  of  the  West  as- 
sumed the  titleof  THE  COMPANY  OF  THE  INDIES, and  50,000 
new  shares  were  constituted,  at  the  rate  of  550  livres  each, 
amounting  to  27,500,000  livres,  or  $5,156,250, 

to  be  employed  in  building  vessels,  in  satisfying  the  creditors 
of  the  old  companies,  and  in  preparations  for  the  general 
trade ;  and  from  the  vain  expectation  of  possessing  a  lucra- 
tive branch  of  commerce,  the  price  of  a  share  rose  in  the 
market  to  1000  livres,  or  $187.50. 

On  the  25th  July,  1719,  the  mint  was  made  over  to  the 
company,  for  a  consideration 

of  50,000,000  livres,  or  $9,375,000, 
to  be  paid  to  the  king. 


BANK  OF  FRANCE.  23 

In  order  to  raise  that  sum  50,000  new  shares  were  ordered, 
at  the  rate  of  1000  livres, 

amounting  to  50,000,000  livres,  or  $9,375,000. 

On  the  27th  of  August  following,  the  great  farms  were 
made  over  to  the  company,  on  their  agreeing  to  pay  in  ad- 
vance of  rent  to  the  king  for  them 

3,500,000  livres,  or  $656,250. 

And,  on  the  31st  of  same  month,  they  obtained  the  gene- 
ral receipt  of  other  branches  of  the  king's  revenue. 

The  company  now  promised  an  annual  dividend  of  200 
livres  on  a  share. 

There  was  now  301,000  shares,  which,  at  200  livres  each, 
amounted  to  60,240,000  livres,  or  $11,295,000. 

In  consideration  of  which,  the  price  rose  in  the  market 

to  5,000  livres,  or  $937.50. 

The  company  now  agreeing  to  lend  the  king,  to  pay  off 
his  creditors  1,500,000,000  livres,  or  $281,250,000, 

at  3  per  cent,  interest,  created,  in  September  and  October, 
300,000  new  shares,  at  5,000  livres  each, 

amounting  to  1,500,000,000  livres,  or  $281,250,000. 

The  company's  capital  was  now  601,200  shares  ;  which, 
at  5,000  livres  each,  is  3006,000,000  livres,  or  $563,625,000. 

And  the  annual  income  arose  as  follows,  viz. 

Interest  from  the  king,  48,000,000  livres, 

Farms,  mint  taxes,  &c.,  39,000,000     « 

From  the  general  trade,  44,000,000    « 


131,000,000  livres, 

or  $24,562,500. 

From  so  great  a  revenue  they  could  well  afford  to  pay 

200  livres  on  a  share,  as  a  dividend ;  which,  on  their  present 

capital,  amounted  to         120,240,000  livres,  or  $22,545,000. 

The  infatuation,  which  at  this  time  prevailed  in  France, 

was  so  great,  as  to  raise  the  price  of  shares 

to  10,000  livres  each,  or  $1,875. 


24  BANK  OF  FRANCE. 

Tiie  original  proprietors  acquired  immense  fortunes.  Mo- 
ney was  abundant  ;  agriculture,  manufactures  and  com- 
merce flourished  ;  and  the  government  were  enabled  to  re- 
lieve the  people  from  taxes,  to  the 

amount  of  87,000,000  livres,  or  $16,312,500. 

Notwithstanding,  the  general  confidence  in  the  stability  of 
the  bank,  and  India  company,  there  were  individuals  who 
held  a  different  opinion  ;  and  they  converted  their  paper  into 
specie,  which  they  either  hoarded  up,  or  shipped  to  other 
countries ;  and  this  occasioned  a  run  upon  the  bank,  until 
there  was  not  enough  left  in  France,  for  the  common  pur- 
poses of  circulation. 

To  avert  the  danger,  which  now  threatened  the  whole  sys- 
tem, several  edicts  were  passed,  restricting  payments  in  spe- 
cie ;  prohibiting  the  manufacture  of  plate,  without  the  royal 
license ;  and  declaring,  that  all  rents,  taxes,  and  customs, 
should  be  paid  in  notes,  the  value  of  which,  was  to  remain 
always  invariable ;  while  the  standard  of  coin  was  kept  in 
constant  fluctuation. 

But  the  restriction  was  carried  to  its  greatest  height  by 
the  edict  of  27th  February,  1720,  which  prohibited  indivi- 
duals, and  secular  or  religious  communities,  from  having  in 
their  possession  more  than  500  livres  in  specie,  under  penalty 
of  confiscation,  fine,  and  imprisonment. 

These  measures  had  the  effect  of  throwing  into  the  bank 
in  specie,  between  the  months  of  February  and  April,  1720, 
the  sum  of  300,000,000  livres,  or  $56,250,000. 

The  royal  bank  was  now  incorporated  with  the  company 
of  the  Indies,  and  the  king  remained  guaranty  of  the  notes, 
of  which  none  were  to  be  fabricated  in  future,  except  by  an 
edict  of  council. 

The  profits  of  the  bank,  since  his  majesty  had  taken  it 
into  his  own  hands,  in  December,  1718,  were  given  up  to 
the  company ;  and  as  they  were  supposed  to  be  immense, 
the  public  entertained  a  high  idea  of  the  company's  opulence. 


BANK  OF  FRANCE.  25 

At  this  period,  the  credit  of  France  was  at  its  height ;  but 
it  soon  experienced  a  reverse,  (hat  involved  thousands  in  mi- 
sery and  distress. 

The  ministry,  who  were  opposed  to  no  law,  represented 
to  the  regent  that  it  was  necessary  to  equalize  the  value  of 
paper  currency,  and  the  coin,  by  either  raising  the  denomi- 
nation of  the  latter  to  130  livres  the  mark,  or  reducing  the 
former  one  half. 

This  absurd  notion  prevailed  in  the  council,  and  it  was  re- 
solved to  diminish  the  value  of  the  bank  notes,  and  the  India 
company's  actions,  that  a  just  proportion  between  them  and 
the  coin  might  be  maintained. 

For  that  purpose,  an  edict  was  passed  on  the  21st  May, 
1720,  ordering  that  shares  should  be  reduced  to  8000  livres, 
and  on  the  1st  of  July,  7500  livres,  and  so  on  500  livres  a 
month,  till  the  1st  of  December,  when  they  were  to  be  fixed 
at  5000  livres. 

It  ordered,  also,  that  bank  notes  should  be  reduced  as  10 
to  8,  bul  that  on  the  first,  day  of  July  they  should  be  further 
reduced — those  of  10,000  livres  to  7,500,  and  so  on  month- 
ly, at  the  rate  of  500  livres,  until  December,  when  they 
should  remain  fixed. 

This  impolitic,  and  disgraceful  measure,  was  followed  with 
corresponding  consequences :  the  notes  lost  all  credit,  and 
the  whole  paper  fabric  fell  to  the  ground.  Mr.  Law's  system 
was  overturned  ;  and,  in  its  ruin,  involved  thousands,  who 
had  converted  their  property  into  bank  currency,  on  the  faith 
and  declarations  of  government,  which  had  solemnly  en- 
gaged, that,  whatever  should  change  the  coin,  the  bank  notes 
should  always  remain  the  same,  and  be  paid  in  full. 

At  this  time,  the  notes  in  circulation,  amounted  to  tne 
enormous  sum  of  2,235,085.590  Jivres,  or  $419,078,535.62. 

And,  as  they  would  not  pass  for  any  fixed  value,  the  distress 
of  the  people  became  extreme,  and  threatened  the  very  exist- 
ence of  government. 

4 


26  BANK  OP  FRANCE. 

To  alleviate,  in  some  measure,  the  evils  existing",  the  bank 
was  shut  for  a  few  days,  under  pretence  of  examining  the  ac- 
counts ;  but  was  opened  again  on  the  10th  June,  for  the  ex- 
change of  notes  of  10  livres  ;  and  notes  of  100  livres  were 
to  be  changed  into  small  notes ;  but  only  one  to  be  brought 
by  each  person,  coming  for  that  purpose.  The  17th  July 
was  fixed  for  the  payment  of  notes  of  100  livres ;  but  the 
concourse  of  people  was  so  great,  that  a  scene  of  riot  and 
confusion  took  place,  which  was  only  quelled  by  a  military 
force. 

To  absorb,  however,  the  immense  amount  of  paper,  with 
which  the  nation  was  deluged,  the  government  had  .recourse 
to  granting  annuities  to  the  holders  of  bank  paper. 

Accordingly  25,000,000  of  perpetual  annuities,  at  the  rate 
of  forty  years  purchase,  and  400,000  at  the  rate  of  twenty- 
five  years  purchase,  were  constituted.  Books  of  account  cur- 
rent, and  transfers  of  600,000,000  were  opened  at  the  bank  j 
and  in  August,  8,000,000  more,  of  perpetual  annuities,  at 
the  rate  of  fifty  years  purchase,  were  issued. 

By  these  means,  2,000,000,000  were  expected  to  be  re- 
turned, amounting  to  $375,000,000, 
but  the  discredit  of  the  paper,  and  the  unfavourable  nature  of 
the  terms,  made  the  people  hesitate.  And  an  edbt  was  passed 
on  the  15th  August,  that  notes  of  10,000  and  1,000  livres 
should  have  no  currency,  except  for  the  purchase  of  annui- 
ties and  bank  accounts.  And  a  further  edict  passed  1st  No- 
vember, prohibiting  all  payments  in  notes. 

Thus  terminated  Mr.  Law's  celebrated  banking  system  ; 
which,  though  founded  on  principles  calculated  for  stability, 
could  not  resist  the  perfidy,  or  folly,  of  a  despotic  govern- 
ment. But  France  had  reaped  some  advantage  from  its  es- 
tablishment, in  her  agriculture,  her  manufactures,  and  com- 
merce ;  and  the  people  had  become  more  industrious,  and 
better  acquainted  with  the  principles  of  trade,  by  the  abun- 
dance of  the  circulating  medium,  which  it  had  produced. 


BANK  OF  FRANCE.  27 

It  is  unnecessary  to  follow  our  inquiries  as  to  the  banking 
establishments  of  the  French,  through  the  period  of  the  revo- 
lution, as  a  new  and  important  institution  for  that  purpose, 
under  the  sanction  of  the  imperial  republic,  has  superseded  all 
others  in  France. 

The  regulations  of  this  bank  were  decreed  by  the  law  of 
24th  Germaine,  year  12,  (1804)  and  are  as  follows : 

1st.  The  association  formed  in  Paris,  under  the  title  of 
THE  BANK  OF  FRANCE.  This  institution  shalHiave  the 
exclusive  privilege  of  issuing  cash  notes. 

2d.  The  capital  of  the  bank  shall  consist  of  4,500  shares, 
at  1000  francs  each,  which,  at  25  francs  the  pound  sterling, 

is  £1,800,000,  or  $8,000,000, 

as  primitive  capital,  subject  to  increase,  through  the  medium 
Preserved  funds.  The  bank  shall  discount  bills  of  ex- 
change, notes,  or  bonds,  but  not  to  carry  on  any  kind  of  com- 
merce, except  in  money  matters. 

The  annual  dividend  shall  not  exceed  6  per  cent,  yearly. 
The  benefits  over  and  above  the  annual  dividend  shall  be 
converted  into  reserved  funds.  The  rules  for  the  direction  of 
this  bank  are  similar  to  those  in  the  United  States. 

Any  person  forging  the  notes  of  this  bank,  are  liable  to 
capital  punishment. 

The  dividend  on  this  bank,  up  to  1830,  inclusive,  at  6  per 
cent.,  is  $12,480,000. 

The  rules  and  regulations  of  this  bank,  are  well  calculated    • 
for  its  security  and  prosperity ;  but  whether  any  institution  of 
this  kind  can  nourish  in  a  despotic  country,  where  the  funds 
are  liable  to  be  diverted  from  their  original  purpose,  by  the  in-   I 
fluence  of  power,  is  extremely  questionable. 

It  is  well  known,  that  all  mercantile  associations  derive 
their  stability  and  credit  from  a  strict  observance  of  the  rules 
by  which  they  are  constituted,  as  the  confidence  of  mankind 
can  be  firmly  placed  only  on  what  is  known,  fixed,  and  de- 
terminate ;  and  there  are  no  establishments  more  inviolable 
than  banking  companies. 


28  BANKING  SYSTEM  OP  SCOTLAND. 


Theutillry  ofbau:: -r  v::?-  if  aiTovJIrifr?*  circa 

medium,  representing  properly,  tho  quantity  of  which  is  only 
limited  by  the  necessity  that  occasions  if,  or  in  other  words, 
by  the  demand  induced  by  the  diversified  operations  of  com- 
merce. 

As  this  substitute  for  money  can  be  fabricated  at  little  ex- 
pense, it  may  be  deemed  an  artificial  and  inexhaustible  mine 
for  supplying  the  deficiency  of  the  precious  metals,  or  alto- 
gether supplanting  them,  as  a  circulating  medium. 

As  gold  and  silver,  however,  have  so  long  represented  pro- 
perty, the  habits  of  mankind  have  attached  an  idea  of  value 
to  them,  which  is  almost  universal ;  and  it  is  only  among 
polished  nations  that  i>nnk  bills  are  current ;  but  to  civilized 
society  they  are  of  the  highest  importance,  and  the  invention 
of  the  banking  system  introduced  a  new  era  in  the  annals  of 
commerce. 


THE  BANKING  SYSTEM  OF  SCOTLAND. 

The  banking  system  of  Scotland  presents  three  great, 
and  leading  features ;  it  offers  to  the  frugal  a  safe,  and 
at  the  same  time  a  profitable  depository  for  their  savings ; 
the  industrious  it  furnishes  with  loans,  advanced  upon  cash- 
credits;  and  the  public  at  large  it  provides  with  a  safe, 
economical,  and  convenient  circulating  medium.  The  uti- 
lity of  the  two  former  functions  is  too  manifest  to  admit  of  dis- 
pute; but  with  regard  to  the  latter  function,  that  of  providing 
a  circulating  medium,  it  is  strenuously  contended,  that  this  is 
not  an  essential  feature  of,  but  merely  an  adjunct  to,  the  sys- 
tem. Those  who  hold  this  opinion,  urge,  that  although  the 
Scotch  system  of  banking  be  good,  as  it  stands  at  present,  it 
would  be  still  better  without  this  adjunct,  which  they  repre- 
sent as  an  unnecessary  and  even  injurious  excrescence. 
From  these  views  we  must  take  the  liberty  of  expressing  our 


BAXII;NC[SYSTEM]OF  SCOTLAND.  29 


unequi vocal  r'brent :  far  from  f ej 
excrescense,  which  might,  be  lopped  or,  h  not  with  a 
tage,  at  leasr,  without  injury,  we  consider  it  as  the  hinge  on 
which  the  whole  system  practically  turns.  Our  readers  need 
scarcely  be  reminded,  that  a  very  large  proportion  of  the  most 
important  transactions  of  those  banks,  receiving  deposits,  and 
advancing  loans  upon  cash  credits,  is  conducted  through  the 
medium  of  branches,  dispersed  throughout  the  various  dis- 
tricts of  that  country;  the  expense  of  maintaing  these  local 
establishments  inconsiderable;  and  would,  unquestionably, 
exceed  any  profit  which  could  accrue  to  tli2  parent  bank, 
from  its  deposits,  and  cash  credit  transactions  alone  ;  the  loss, 
thus  occasioned,  is  now  maJe  up  to  the  parent  banks  by  the 
profit  derived  from  the  circulation  of  their  notes.  If  the  pa- 
rent banks  were  deprived  of  this  source  of  emolument,  it 
cannot  admit  of  a  doubt,  that  all  or  at  least  nearly  all  the 
branches  would  be  relinquished*  In  some  towns  and  popu- 
lous places,  they  might  clear  their  expenses,  and  maintain 
their  ground,  even  if  this  premium  were  withdrawn  ;  but  for 
the  poorer  and  more  thinly  populated  districts,  where  the  ac- 
commodation which  they  furnish  is  most  wanted,  and  per- 
haps most  useful,  they  would  infallibly  disappear.  The  wit- 
nesses examined  by  the  committee  of  the  house  of  commons, 
appointed  to  inquire  into  the  principles  and  practical  operation 
of  thesystem,  were  very  closely  questioned  as  to  this  point  ; 
and  their  uniform  answer  was,  that,  without  the  profit  arising 
from  the  circulation  of  a  paper  currency,  under  five  pound?, 
the  branch  banks  could  not  be  continued  ;  the  commission  of 
one  per  cent.,  (which  is  the  difference  between  the  interest  al- 
lowed upon  deposits,  and  that  charged  on  advances  made 
under  cash  credits,)  not  being,  of  itself,  sufficient  to  defray 
the  unavoidable  expenses  of  such  establishments,  in  thinly 
populated  districts  and  small  towns,  where  the  amount  of  the 
business  transacted  is  necessarily  limited.  It  was  suggested, 
by  some  of  the  members  composing  that  committee,  that, 
either  by  allowing  so  much  less  interest  upon  deposits,  or 


30  RANKING  SYSTEM  OF  SCOTLAND. 

charging  so  much  more  interest  on  cash  credit  loans,  the 
banks  of  Scotland  might  make  up  for  the  loss  which  would 
be  occasioned  by  the  discontinuance  of  paper  money.  This 
suggestion  the  witnesses  effectually  rebutted,  by  observ- 
ing, that  either  of  these  two  modes  of  supplying  the  defalca- 
tion which  would  arise  from  the  withdrawal  of  a  paper 
currency,  would  inevitably  prove  fatal,  at  least  to  the  cash 
credit  branch  of  the  system.  The  interest  allowed  upon  de- 
posits is  always  reduced  to  the  lowest  rate  at  which  it  can  be 
maintained,  without  driving  away  the  capital  now  intrusted 
to  the  management  of  the  Scotch  bankers :  an  additional 
reduction,  even  of  a  trifling  amount,  might,  and  unques- 
ably  would,  force  a  very  considerable  proportion  of  the  whole 
body  of  depositors  to  withdraw  their  funds,  and  to  seek  out 
for  another,  and  more  profitable  channel  of  investment.  The 
interest  now  allowed  upon  bank  deposits  is  less,  by  ten  shil- 
lings per  cent.,  than  could  be  obtained  on  private  loans  j  but 
the  superior  credit  of  the  banks,  as  well  as  various  other  ad- 
vantages, incident  to  this  mode  of  investment,  induce  capi- 
talists to  give  it  the  preference.  If,  however,  the  rate  of  in- 
terest, already  below  the  average  level  of  what  is  obtained  on 
private  loans,  should  be  still  further  reduced,  it  is  certain  that 
the  capitalist  would  no  longer  transact  his  affairs  through  the 
medium  of  the  banks,  but  would,  rather  than  consent  to  a 
further  sacrifice,  expose  himself  to  the  risk  and  inconvenience 
of  dealing  directly  with  the  private  borrower.  Any  at- 
tempt, therefore,  to  augment  the  profits  of  the  Scotch  banks, 
by  reducing  the  rate  of  interest  allowed  upon  deposits,  still 
further  below  the  average  rate  of  interest  in  the  general  mo- 
ney market  of  the  empire,  would  unavoidably  fail.  It  would, 
indeed,  appear  about  as  rational,  as  well  as  effectual,  as  an 
attempt,  by  means  of  a  sieve,  to  keep  the  water  of  one  side 
of  a  stream  higher  than  the  level  of  the  same  channel  on  the 
other  side.  The  bankers  of  Scotland  have  hitherto  enjoyed 
the  reputation  of  being,  not  only  tolerably  well  acquainted 
with  their  own  business,  but,  also  pretty  much  alive  to  their 


BANKING  SYSTEM  OF  SCOTLAND.  31 

own  interests ;  and  we  may,  therefore,  be  well  assured  that 
this  wary,  sagacious,  and  intelligent  class  of  traders,  never  al- 
low a  rate  of  interest  upon  deposits  which  exceeds  by  a  sin- 
gle shilling  what  is  necessary,  in  order  to  retain  the  capital 
now  intrusted  to  their  management.  Comparing  the  loss 
which  would  be  sustained  from  the  withdrawal  of  a  very 
considerable  portion  of  the  money  which  now  passes  through 
their  hands,  with  the  profit  which  would  accrue  from  reducing 
the  rate  of  interest  allowed  upon  the  remainder,  they  ar- 
rive at  the  practical  conclusion,  that  the  former  would  more 
than  counterbalance  the  latter. 

Equally  futile  would  prove  the  endeavor  to  make  up  the 
deficiency  of  revenue,  occasioned  by  the  suppression  of  a  pa- 
per circulating  medium,  by  the  imposition  of  a  higher  rate  of 
interest  than  is  now  charged  upon  loans  advanced  on  cash 
credits.  The  rate  of  interest  charged  upon  these  loans  is  al- 
ready somewhat  above  the  average  of  the  money  market. 
The  borrowers  are  willing  to  bear  this  extra  charge  rather  than 
encounter  the  trouble  and  delay  which  generally  embarrass 
all  applications  to  private  capitalists ;  but  if  the  banks  should 
raise  the  interest  charged  upon  cash  credit  loans,  still  higher 
above  the  average  level  of  the  money  market,  it  would  in- 
evitably have  the  effect  of  driving  at  least  a  very  large  pro- 
portion of  the  class  of  borrowers,  to  deal  directly  with  the 
class  of  lenders  ;  and  the  additional  profit  which  would  ac- 
crue on  the  loans  advanced  to  the  lesser  number,  which 
might  perhaps  still  continue  to  deal  with  the  bank,  would 
not  countervail  the  unavoidable  loss  of  a  large  portion  of  its 
present  custom.  In  either  of  these  cases,  the  practical  result 
would  be  precisely  the  same ;  if  the  banks  reduced  too  low 
the  rate  of  interest  upon  deposits,  they  would  have  less  to 
lend ;  if  they  charged  too  high  an  interest  upon  loans,  they 
would  diminish  the  number  of  borrowers  :  and  hence  would 
unavoidably  follow  the  discontinuance  of  the  various  branches 
now  maintained  by  the  parent  institutions, 


32  BANKING  SYSTEM  OF  SCOTLAND. 

It  must,  no  doubt,  be  admitted,  that  the  establishment  of 
joint  stock  companies,  for  the  purpose  of  employing  in  dis- 
counting bills  of  exchange  such  balances  as  might  be  placed 
at  their  disposal  by  their  customers,  would  be  an  important 
improvement  upon  our  present  practice  of  banking.  Com- 
mercial capitalists  would  by  this  means  be  furnished  with  safe 
depositories  for  such  small  balances  as  would  be  required  for 
conducting  their  daily  transactions ;  the  aggregate  of  these 
balances  would  afford  a  supply  of  capital  for  the  purpose  of 
discounting  good  bills  of  exchange;  and  the  credit  of  joint 
stock  companies  would  secure  the  resources  of  these  institu- 
tions from  being  crippled  by  the  influence  of  those  circum- 
stances which  so  often  influence  the  customers  of  private 
banks  to  withdraw  their  balances  with  the  abruptness  of  ter- 
ror. But  although  t  his  would  be  a  great  improvement  on  our 
subsisting  practice,  it  would  still  fall  infinitely  short  of  the 
efficiency  and  utility  of  the  system,  which,  for  upwards  of  a 
century,  has  prevailed  on  the  other  side  of  the  Tweed  ;  and, 
in  spite  of  old  Hesiod's  maxim,  no  statesman,  who  is  master 
of  his  craft,  will  content  himself  with  half  an  advantage, 
when  the  whole  is  practically  within  his  reach.  No  commu- 
nity can  derive  from  banking  all  the  advantages  which  the 
practice  is  capable  of  yielding,  until  establishments  have  been 
every  where  organized,  on  principles  which  must  attract  to 
these  reservoirs  the  accumulated  savings  of  each  district,  to 
be  then  laid  out  in  encouraging  enterprise,  and  developing 
the  resources  of  productive  industry.  "With  regard  to  the  first 
of  these  points— 

"It  is  astonishing,"  observes  Mr.  Scrope,  '-to  what  shifts 
and  expedients  persons  are  driven  in  England,  for  the  utili- 
zation of  whatever  small  sums  they  have  saved,  in  conse- 
quence of  the  English  banks  not  allowing  interest  upon  depo- 
sits. The  establishment  of  savings  banks  was  of  incalcu- 
lable advantage  in  this  respect,  but  the  amount  of  deposits  in 
them  being  limited  to  one  hundred  and  fifty  pounds,  the  dif- 
ficulty of  placing  out  larger  sums  with  safety  has  led  to  much 


BANKING  SYSTEM  OF  SCOTLAND.  33 

destruction  of  capital,  and  great  individual  misery.  In  a 
small  country  district,  within  the  cognizance  of  the  writer, 
two  attorneys  have  successively  failed,  within  a  few  years  one 
of  the  other ;  the  first  to  an  amount  of  near  one  hundred 
thousand  pounds — the  second  of  more  than  two  hundred 
thousand.  The  creditors  of  both,  on  examination,  were 
found  to  consist  almost  wholly  of  old  servants,  retired  trades- 
men, and  farmers,  and  the  widows  and  orphans  of  such  per- 
sons, who  had  deposited  their  small  fortunes  with  either  at- 
torney, on  his  personal  responsibility.  It  cannot  be  doubted, 
that  had  there  been  a  bank  of  acknowledged  security  in  this 
district,  which,  like  the  Scotch  banks,  allowed  a  fair  interest 
on  deposits  of  any  amount,  the  greater  part,  if  not  the  whole 
of  this  property,  would  have  been  lodged  there  in  safety,  and 
hundreds  of  individuals  preserved  in  a  state  of  comfort,  who 
are  now  reduced  in  their  old  age  to  the  wretched  condition  of 
parish  paupers." 

Our  own  experience  enables  us  fully  to  corroborate  this 
statement ;  we  have  personally  witnessed  several  instances 
of  a  similar  kind,  in  which  either  the  failure  of  insolvent  at- 
torneys, or  country  banks  which  allowed  interest  upon  depo- 
sits, has  overwhelmed  a  very  large  proportion  of  the  inhabit- 
ants of  whole  districts  at  once  with  poverty  and  despair.  But 
however  useful  the  northern  banks  may  be,  as  depositories 
for  the  savings  of  the  economical  classes,  they  are  still  more 
valuable  to  the  public,  on  account  of  the  encouragement 
which,  through  their  system  of  cash  credits,  they  hold  out  to 
enterprize  and  industry.  Their  managers  are  impelled  by 
the  most  powerful  motives  to  exert  themselves  in  discovering 
a  lucrative  method  of  laying  out  the  capital  placed  in  their 
hands  ;  this  being  the  only  way  in  which  they  can  get  back 
the  interest  which  they  allow  upon  deposits.  It  is  their 
prime  object  and  business  to  search  for  instruments  fit  to  ren- 
der productive  the  capital  intrusted  to  their  management ; 
and  these  instruments  can  be  found  only  in  that  class  of  men 
who,  possessing  a  reputation  for  integrity  and  industry,  are 

D 


34  BANKING  SYSTEM  OF  SCOTLAND. 

destitute  of  the  capital  required  for  the  undertakings  in  which 
their  enterprize  may  lead  them  to  engage.  The  bankers 
are  to  the  full  as  anxious  to  discover  persons  of  this  descrip- 
tion, in  order  to  lend,  as  these  persons  themselves  can  pos- 
sibly be  to  find  out  capitalists  from  whom  they  may  borrow, 
It  is  this  saving  of  capital,  on  the  one  hand,  and  encourage- 
ment to  industry,  on  the  other,  which  have  mainly  contri- 
buted to  advances  which  Scotland  is  acknowledged  to  have 
made  in  wealth  and  prosperity  within  the  last  hundred  years. 
Before  the  introduction  of  the  present  banking  system,  the 
people  of  that  country  had  no  safe  depositories  in  which  they 
could  have  placed  small  savings  ;  hence  their  savings  were 
hoarded  up,  and  remained  unproductive,  both  to  the  owners 
and  the  community.  Under  the  operation  of  the  present 
system,  every  shilling  which  an  economical  member  of  the 
community  is  enabled  to  save,  is  instantly  carried  to  the  local 
bank,  whence  it  passes  into  the  hands  of  some  industrious 
and  enterprising  person,  who  will  employ  it  profitably. 

Another  observation  may  be  added  in  this  place.  Banks, 
which,  by  their  credit  and  known  solidity,  have  conciliated 
public  confidence  so  far  as  to  attract  into  their  coffers  the  ag- 
gregate savings  of  each  district,  in  the  form  of  deposits  Lear- 
ing  interest,  are  equally  useful  every  where  ;  they  stimulate 
to  industry  and  economy  the  artisan  and  mechanic,  as  wrell 
as  the  agricultural  laborer.  But  the  practice  of  granting  cash 
credits  appears  less  indispensable  for  the  purposes  of  the  com- 
mercial, than  for  the  wants  of  the  agricultural  classes.  The 
little  shopkeepers  or  tradesmen  of  fair  character,  can  easily 
get  goods  on  credit  from  some  wholesale  dealer  ;  the  want  of 
capital  does  not,  therefore,  utterly  preclude  any  individual 
belonging  to  this  class  from  commencing  business  on  his  own 
account ;  but  the  farmer  who  wants  capital,  has  no  resource 
of  this  kind ;  whatever  improvements  he  may  desire  to  ac- 
complish, must  be  delayed  in  every  instance ;  and  in  the 
greater  number  of  cases  altogether  relinquished,  because  he 
cannot  command  the  means  required  to  carry  them  into  exe- 


BANKING  SYSTEM  OF  SCOTLAND.  35 

cution.     It  may  be  said  that  this  impediment  to  agricultural 
improvement  might  be  obviated  by  a  loan,  advanced  to  the 
farmer  by  some  private  friend,  or  by  a  bank;  but  granting 
that  the  necessary  accommodation  could  be  thus  obtained,  it  is 
clear  that  it  would  be  much  more  expensive  to  the  party  ac- 
commodated than  a  cash  credit  of  equal  efficiency.     Under 
the  system  of  cash  credits,  a  maximum  is  fixed  above  which 
the  borrower  is  not  allowed  to  draw  upon  the  bank  :  but  he 
is  not  obliged  to  take  the  whole  of  this  at  once,  and,  in  con- 
sequence pay  interest  upon  it ;  he  draws  it  out    gradually, 
as  his  necessities  require,  and  interest  is  charged  only  from 
the    time  when   each   particular   sum   is  drawn  out ;    on 
the  other  hand,  he  is  not  only  allowed,  but  expected,    to 
pay  into  the  bank  the  proceeds  of  the  produce  of  his  farm, 
which  from  time  to  time  he  disposes  of  in  the  market ;  and  on 
these  payments  interest  is  also  allowed  on  the  credit  side  of 
his  account.     Hence  it  necessarily  follows,  that  the  farmer 
who  conducts  his  affairs  with  the  aid  of  a  cash  credit,  never 
pays  interest  for  more  money  than  he  actually  employs  in  his 
business,  nor  keeps  a  pound  lying  idle  and  unproductive  in 
his  desk.     This  economy  of  capital  forms  a  peculiar  feature 
of  the  banking  system  of  the  north,  and  gives  the  industrious 
classes  there,  in  all  their  operations,  a  very  great  advantage 
over  ours.     When  an  English  farmer  sells  any  portion  of  his 
produce,  he  has  generally  no  alternative  which  can  serve  his 
purposes  better  than  to  keep  the  proceeds  locked  up  in  his 
drawer  until  the  next  rent  day.     He  may,  it  is  true,  lodge  it 
in  the  hands  of  some  country  banker — but  then  he  can  get 
no  interest  for  it,  and,  besides,  the  banker  may  fail.     The 
result  of  this  absence  of  the  stimulus  of  profit  on  the  one 
hand,  combined  with  the  fear  of  loss  on  the  other,  is,  that  a 
very  large  portion  of  the  capital  employed  in  agriculture,  in 
this  country,  remains,  during  intervals  of  considerable  length, 
absolutely  idle.     The  individual  loss  thus  incurred  by  each 
farmer,  is  by  no  means  inconsiderable,  and  the  aggregate  loss 
of  the  public  is,   unquestionably,  of  very  great  amount. 


36  BANKING  SYSTEM  OF  SCOTLAND. 

Under  the  operation  of  the  banking  system  of  our  northern 
neighbors,  on  the  contrary,  the  whole  mass  of  capital  is  in 
a  constant  state  of  circulation ;  no  portion,  however  minute, 
remains  for  the  space  of  one  day  stagnant.  The  Scottish 
system  of  banking  may  therefore  claim  the  merit  of  pro- 
ducing the  greatest  practical  result?,  with  the  least  expend- 
iture of  means.  Compared  with  England,  the  amount  of 
capital  employed  in  productive  industry,  in  the  sister  king- 
dom, appears  inconsiderable  ;  but  the  facility  as  well  as  ra- 
pidity with  which  this  capital  circulates,  more  than  compen- 
sates for  this  deficiency  :  and  taking  into  consideration  the 
different  extent  of  the  surfaces  over  which  they  are  spread, 
it  may  be  asserted,  on  the  best  grounds,  that  the  scanty  capi- 
tal of  Scotland  yields  annually  a  larger  produce,  both  to  the 
owners  and  the  public  at  large,  than  the  much  more  abun- 
dant capital  of  England  ;  it  being  well  known,  that  under 
the  operation  of  the  system  of  deposits  arid  cash  credits,  a 
given  extent  of  land  may  be  equally  well  cultivated  with  two 
thirds,  or  perhaps  one  half  of  the  capital  which  would  be  re- 
quired for  a  similar  purpose  in  England,  where  it  may  be  as- 
sumed that,  combining  time  with  amount,  one  half  of  the 
whole  farming  capital  remains  in  a  state  of  stagnation,  and, 
by  consequence,  unproductive.  It  is  also  clear,  that  under 
the  northern  system,  capital  must  be  more  equally  diffused 
than  it  is  in  England ;  the  surplus  of  the  wealthy  farmer 
passes  without  delay  into  the  bank  reservoir,  whence  it  finds 
its  way  into  the  hands  of  his  less  opulent  neighbor,  who 
stands  in  need  of  temporary  assistance.  In  England,  the 
agriculturalist  who  possesses  capital  sufficient  to  meet  the 
most  expensive  seasons  or  emergencies,  must  at  certain  times 
have  a  considerable  portion  lying  dead  upon  his  hands ; 
while  the  tillage  of  farms  in  his  vicinity,  occupied  by  less 
fortunate  persons,  languishes  for  want  of  funds.  Hence  a 
double  injury  :  the  rich  agriculturalist  loses  from  an  overplus, 
and  the  poor  one  from  a  defective  supply  of  capital.  Under 
the  Scottish  system,  on  the  contrary,  the  supply  is  invariablv 


BANKING  SYSTEM  OF  SCOTLAND.  37 

and  regularly  proportioned  to  the  wants  of  each  individual, 
at  every  season  ;  the  rich  man  need  not  be  at  the  expense  of 
more  capital  than  can  be  profitably  absorbed  in  his  business  ; 
and  his  poor  neighbor,  of  fair  reputation  for  honesty  and  in- 
dustry, may  always  command  an  abundant  supply. 

It  must  at  the  same  time  be  manifest,  that  pecuniary  ac- 
commodation, by  way  of  private  loan,  is  not  only  more  ex- 
pensive when  procured,  but  incalculably  more  difficult  to  be 
obtained,  than  it  is  under  the  cash-credit  system  of  Scotland. 
Private  individuals  who  lend  upon  personal  security,  incur  at 
all  times  a  very  considerable  risk  of  losing  their  money  ; 
fully  occupied,  in  general,  with  their  own  pursuits,  they  have 
no  leisure  to  watch  the  conduct  of  their  debtors  ;  and  if  they 
enjoyed  the  leisure  required  for  this  purpose,  they  possess  no 
means  of  acquiring  much  information  as  to  this  point,  which 
may  be  useful  to  them  ;  hence  it  occurs  that,  in  nine  cases 
out  of  ten,  money  lent  upon  personal  security  is  finally  lost 
to  the  owner.  Speaking  in  general  terms,  we  may  there- 
fore say  that  the  practice  is  unknown  in  England  ;  however 
industrious  and  steady  a  poor  man  may  show  himself  in  this 
country,  he  can  rarely,  if  ever,  obtain  a  loan  of  money  upon 
his  own  personal  security  ;  and  still  more  rarely  can  he  pre- 
vail upon  any  persons  of  substance  to  become  bound  for  him, 
if  he  should  meet  with  a  capitalist  willing  to  accommodate 
him  on  these  terms.  But  the  money  lent  under  cash-credits 
is  advanced  upon  a  system  which  almost  infallibly  insures  its 
repayment.  It  is  the  first  object  of  a  Scotch  banker  to  ascer- 
tain the  character  of  the  person  who  applies  to  him  for  a  cash- 
credit  ;  and,  from  the  moment  in  which  this  accommodation 
is  granted,  it  becomes  his  regular  and  incessant  business  to 
watch  with  the  utmost  care,  the  conduct  and  proceedings  of 
his  debtor ;  and  to  enable  him  to  accomplish  this  object,  he 
requires  little  further  aid  than  that  which  is  furnished  him 
by  his  own  books.  By  examining  the  accounts  of  any  per- 
son accommodated  with  a  cash-credit,  he  can  tell  at  once  and 
at  any  period,  whether  his  debtor  is  relaxing  in  industry,  and 


33  BANKING  SYSTEM  OP  SCOTLAND. 

whether,  in  consequence,  any  portion  of  the  capital  lent  runs 
the  risk  of  being  lost.  The  moment  such  a  person  ceases 
to  pay  into,  as  well  as  draw  from  the  bank,  the  suspicions  of 
the  manager  become  excited,  an  explanation  is  instantly  de- 
manded, and  if  this  should  not  prove  satisfactory,  the  cash- 
credit  is  withdrawn,  and  the  payment  of  the  balance  rigo- 
rously enforced.  By  glancing  their  eyes  once  or  twice  a 
week  over  their  books,  the  managers  can  ascertain  what  their 
cash-credit  debtors  are  about,  and  how  they  are  going  on, 
very  nearly  as  well  as  if  they  accompanied  them  to  every  fair 
or  market  in  the  district.  The  moment  any  commodity  is 
sold,  the  proceeds  are  eagerly  taken  to  the  bank  ;  firstly,  be- 
cause this  tends  very  materially  to  sustiin  the  credit  of  the 
borrower  ;  and  secondly,  because  he  is  unwilling  to  lose,  even 
fora  single  day,  the  interest  which  accrues  upon  deposits  from 
the  hour  in  which  they  are  lodged.  The  managers  of  the 
Scotch  banks  thus  constitute  a  species  of  social  police,  infi- 
nitely superior  to  any  thing  that  has  been  ever  known  in  any 
other  part  of  the  world  :  they  form  a  corps  of  thoroughly  or- 
ganized and  vigilant — what  shall  we  call  them  ? — spies,  im- 
pelled by  the  strong  impulse  of  interest  to  watch  with  the 
most  careful  attention,  the  conduct  and  proceedings  of  the 
classes  engaged  in  productive  industry.  The  prodigious  in- 
fluence which  such  a  system  of  vigilant  inspection  and  con- 
trol must  exercise  over  the  whole  of  the  industrious  popula- 
tion, is  far  too  palpable  to  render  it  necessary  for  us  to  do  more 
than  to  point  it  out  to  the  attention  of  the  public. 

To  the  influence  of  this  admirably  organized  system  may 
justly  be  ascribed,  in  perhaps  a  more  especial  manner,  the 
rapidity  with  which  agriculture  has  advanced  in  Scotland, 
since  the  middle  of  the  last  century.  Whenever  the  land- 
owners of  any  district  determined  upon  commencing  a  career 
of  improvement,  their  first  measure  has  generally  been  to 
encourage  the  introduction  of  a  branch  bank  ;  and  few  are 
the  instances  in  which  the  advantages  anticipated  from  this 
preliminary  step  have  not  been  realizad.  The  small  sums 


BANKING  SYSTEM  OF  SCOTLAND.  39 

saved  by  the  working  classes  were  regularly  deposited  in  the 
local  bank,  whence  tbcy  found  their  way  in  larger  masses 
among  the  farmers  of  tbc  district.  Having  passed  through 
the  hands  of  tli2  farmers,  this  capital,  in  the  form  of  wages, 
came  a  second  time  into  the  pockets  of  the  laboring  classes, 
who  added  to  their  previous  deposits  every  shilling  which 
they  could  save  from  their  weekly  earnings.  There  is,  there- 
fore, good  ground  for  asserting  that  a  very  large  portion  of 
the  territory  of  Scotland  has  been  reclaimed  and  improved 
not  only  by  the  labor,  but  also  by  the  savings,  of  the  working 
peasantry  :  a  result  which  has  been  alike  beneficial  to  all 
the  parties  interested  in  the  cultivation  of  the  soil.  To  the 
landlord  it  has  proved  the  source  of  an  augmented  rent ;  to 
the  farmer  it  has  yielded  a  handsome  profit,  over  and  above 
the  interest  paid  for  the  capital  which  he  borrowed  of  the 
bank,  for  the  purpose  of  carrying  on  his  improvements, 
and  to  the  working  classes  it  has  proved  the  means  of 
furnishing,  not  only  constant  employment,  but  a  higher 
compensation  for  their  labor.  The  capital  saved  and  de- 
posited in  the  banks  by  this  class  has  enabled  the  farmers  of 
every  district  to  undertake  agricultural  improvements  :  this 
has  created  an  additional  demand  for  labor,  and  raised 
wages  ;  and  the  economy  thus  encouraged  by  banks  for 
deposits,  has  produced  a  reaction  highly  favorable  to  the  con- 
dition of  the  body  of  laborers. 

London  Quarterly  Review. 

The  paper  circulation  of  Scotland  is  carried  on,  first,  by 
chartered  banks  :  and  second,  by  private  establishments. 

FIRST CHARTERED   BANKS. 

There  are  three  corporate  bodies  by  whom  notes  are  issued 
—"the  Bank  of  Scotland,"— u  the  Royal  Bank ;"— and 
"the  British  Linen  Company."  The  latter,  though  origi- 
nally intended  for  manufacturing  purposes,  was  afterwards 
converted  into  a  banking  establishment. 


40  BANKING  SYSTEM  OF  SCOTLAND. 

A  short  account  of  the  bank  of  Scotland  is  given  in  the 
general  report  of  the  kingdom.*  It  is  sufficient  here  to  ob- 
serve, that,  after  several  augmentations,  its  capital  now 
amounts  to  £1,500,000  ;  of  which  only  one  million  has  been 
paid  up.  The  remaining  £500,000  may  be  called  for  ;  but 
there  is  no  reason  to  suppose  it  will  be  necessary,  as  its  pre- 
sent capital,  with  the  large  deposits  it  receives,  is  fully  ade- 
quate to  the  business  it  carries  on.  Each  share  consists  of 
£1,000  of  old  Scotch  money,  or  £83.6.8fcsterling  :  and  as 
shares  now  sell  for  £200  sterling,  there  is  a  profit  on  each  to 
the  amount  of  £116.13.4.  The  interest  per  share  is 
£7.18.4.,  being  only  about  4  per  cent.  This  proves  the  high 
estimation  in  which  the  interest  of  the  stock  of  that  bank  is 
held,  in  consequence  of  the  ability  and  success  with  which 
its  affairs  are  conducted.  Indeed,  there  is  not  a  more  advan- 
tageous mode  of  investing  money  than  in  the  stock  of  that 
bank;  for,  in  addition  to  the  annual  dividends,  it  has,  at  va- 
rious times,  been  enabled  to  give  bonuses  to  its  proprietors,  to 
the  amount,  it  is  said,  of  about  £200,000. 

The  Royal  Bankhas  a  similar  capital,  namely,  £1,500,000, 
which  is  all  paid  up.  It  divides  annually,  £150,000,  in  pro- 
portion to  which  income  is  the  price  of  its  stock.  Its  affairs 
are  likewise  conducted  with  much  prudence  and  economy. 

The  British  Linen  Company,  an  account  of  which  is  given 
in  the  general  report  of  Scotland.!  has  a  capital  of  £500,000, 
with  which  it  carries  on  a  great  extent  of  business,  in  a  most 
successful  manner.  It  has  paid  up  all  its  capital,  the  annual 
dividend  on  which  is  £9  per  cent.  Its  stock  now  sells  for 
£246  per  £100  ;  furnishing  an  immense  profit  to  the  origi- 
nal proprietors,  besides  several  bonuses  which  have  been  di- 
vided amongst  them. 

On  the  whole,  the  "chartered  banks"  of  Scotland  carry  on 
their  business  with  capitals  to  the  amount  of  £3,000,000, 
(to  which  £500,000  might  be  added  by  the  Bank  of  Scot- 

*  See  General  Report  of  Scotland,  v.  5,  p.  341. 
t  General  Report  of  Scotland,  v.  5,  p.  439. 


BANKING  SYSTEM  OF  SCOTLAND.  41 

land,  if  necessary ;)  and  by  the  excellence  of  their  manage- 
ment, they  have  not  only  essentially  benefited  their  country, 
but  enriched  themselves. 

SECOND PRIVATE,  OR  PROVINCIAL  BANKS. 

In  Scotland,  there  are  no  restrictions  in  regard  to  the  num- 
ber of  partners  in  a  banking  establishment,  issuing  notes.  It 
may  consist  of  one,  or  of  a  thousand  proprietors.  This  is 
certainly  going  too  far ;  for  the  security  of  one,  two,  or  three 
individuals  must  always  be  precarious  ;  and  the  greater  the 
number  of  partners,  the  less  is  the  risk  of  fraud.  One  man 
may  do,  what  it  would  be  difficult  to  persuade  twenty  to  con- 
cur in.  This  error,  though  it  has  not  hitherto  occasioned  any 
material  public  injury,  ought  to  be  corrected  by  law. 

It  is  a  great  advantage,  however,  attending  the  Scotch  sys- 
tem of  banking,  that  there  is  no  precise  limit  to  the  number 
of  partners  who  can  join  in  the  same  concern.  Thus,  num- 
bers being  interested  in  the  prosperity  of  the  bank,  its  circu- 
lation and  credit  are  augmented  ;  and  a  greater  quantum  of 
prosperity  being  involved  in  the  concern,  there  is  hardly  any 
possible  risk  of  public  loss. 

There  are,  in  Scotland,  besides  the  three  chartered  banks, 
twenty-six  private  banking  establishments,  issuing  promis- 
sory notes.  Several  of  these  have  branches  situated  at  a  con- 
siderable distance  from  the  mother  bank.*  The  number  of 
partners,  exclusive  of  the  three  chartered  banks,  may  be 
stated  at  1400,  or,  on  an  average,  53.  One  (the  Commercial 
Bank  of  Scotland,)  has  no  less  a  number  than  606  partners; 
others,  where  the  business  is  small,  have  only  two  or  three. 

In  order  to  give  an  idea  of  the  excellent  management  of 
the  Scotch  private  or  provincial  banks,  the  following  account 
of  the  Aberdeen  bank  has  been  procured. 

This  bank  was  established  in  1767,  with  a  nominal  ca- 
pital of  £100,000,  in  two  hundred  shares,  of  £500  each. 

*  The  number  of  banks  in  Scotland,  public  and  private,  is  29 ;  but  they 
have,  in  all,  about  100  branches,  scattered  over  the  whole  kingdom,  emanating 
from  them. 

6 


42  BANKING  SYSTEM  OF  SCOTLAND. 

Only  £150  per  share,  or  £30,000  in  all,  were  originally  paid 
in;  and  no  future  call  has,  ever  since,  been  made  on  the  part- 
ners. The  annual  dividends  were,  at  first,  £20  per  share  ; 
for  many  years  they  were  £40,  and  they  are  now  £60. 

Instead  of  any  extra  dividends,  it  has  been  the  usage  to 
add  a  bonus  to  the  stock  of  each  partner.  In  this  way,  not 
only  has  the  original  capital  of  £500  per  share  been  paid  up, 
but  also  the  capital  since  it  has  been  doubled,  for  it  now 
amounts  to  £1000  per  share.  The  partners  were  originally 
about  160  in  number  ;  and  in  the  first  contract,  the  number 
of  shares  to  be  held  by  each  individual  was  limited.  But 
when  the  contract  was  renewed,  that  clause  was  done  away. 
The  number  of  partners  is  now  about  80.  Several  shares 
stand  in  the  name  of  the  company. 

The  highest  price  hitherto  given  for  any  share,  has  been 
£1,500;  and  the  price  varies  from  that  sum  down  to  £1,400, 
according  to  the  opinion  of  the  parties  buying  and  selling  at 
the  time. 

A  very  large  sum,  now  only  at  3  per  cent.,  has  been  lodged 
with  the  bank,  in  consequence  of  the  high  idea  entertained  of 
the  prudence  and  good  conduct  with  which  the  affairs  of  the 
company  are  managed.  The  directors  are  thus  enabled  to 
be  sufficiently  liberal  in  the  credits  they  give,  and  the  loans 
they  furnish,  to  the  commercial,  manufacturing,  and  agricul- 
tural interests. 

Among  the  unchartered  establishments,  "  The  Commercial 
Banking  Company  of  Scotland"  ought  to  be  particularly 
mentioned,  as  it  is  distinguished,  not  only  by  the  number  of 
its  partners,  (606,)  but  by  the  spirit  and  success  with  which 
its  operations  are  conducted.  It  commenced  business  on  the 
25th  of  March,  1810,  with  a  capital  of  three  millions,  of 
which  it  has  only  been  necessary  to  call  for  £500,000.  Its 
dividend  is  at  the  rate  of  six  per  cent.,  and  its  stock  already 
sells  for  £150  per  share.  Its  profits  could  afford  a  larger  di- 
vidend, but  it  prefers  laying  up  an  annual  sum,  to  guard 
against  contingencies. 


BANKING  SYSTEM  OF  ,-X'OTLAND.  43 

It  would  be  in  vain  attempting,  in  a  short  work  of  this  de- 
scription, to  enter  into  the  details  of  the  management  of  these 
most  valuable  institutions.  But  I  cannot  deny  myself  the 
satisfaction  of  explaining  the  public  advantages  desirable 
from  these  establishments,  including  the  chartered  com- 
panies. 

1.  From  the  licenses  the  private  companies  are  obliged  to 
take  out,  and  the  stamps  on  the  notes  of  both  the  chartered 
and  the  unchartered  banks,  considerable  sums  are  received 
by  government. 

2.  They  are  of  great  use  to  private  individuals,  furnish- 
ing them  with  a  place  of  security,  where  they  can  safely  de- 
posit small,  or  even  large  sums ;  receiving  for  them  a  mode- 
ratejtfiterest,  formerly  at  the  rate  of  4  per  cent.,  but  now  re- 
duced to  3  or  31  per  cent.     The  whole,  however,  or  any  part 
of  the  sum  thus  placed,  can  be  obtained  whenever  it  is  de- 
manded.    The  result  is  very  satisfactory.     These  deposits 
in  the  various  Scotch  banking  establishments  amount,  in  all, 
to  several  millions  sterling,  (from  15  to  20  millions,)  and 
thus  the  banks  are  enabled  to  be  of  greater  use  to  the  indus- 
try of  the  country,  than  if  they  relied  upon  their  own  capi- 
tals alone. 

3.  The  advantages  derived  from  these  establishments  by 
the  agriculture   of  Scotland,  is  of  the  highest  importance. 
The  celebrated  Sir  James  Stewart,  in  hfe  work  on  Political 
Economy,  says,  "To  the  banks  of  Scotland  the  improve- 
ment of  that  country  is  entirely  owing?* 

4.  In  common  with  all  other  such  institutions,  the  bank- 
ing establishments  of  Scotland  are  highly  favorable  to  com- 
merce and  manufactures,  enabling  them  to  be  carried  on  to 
an  extent  which  would  otherwise  be  impracticable.     This 
has  been  greatly  owing  to  the  banks  giving  what  are  called 
CASH  ACCOUNTS.  Credits  of  this  kind  are  frequently  granted 

*  Stewart's  Political  Economy,  last  ed.  vol.  iii.  p.  197.  Without  going-  BO 
far,  it  may  be  safely  asserted,  that  to  the  improvement  of  Scotland  they  have 
essentially  contributed. 


44  BANKING  SYSTEM  OP  SCOTLAND. 

by  banks  and  bankers  in  other  countries.  But  the  readiness 
with  which  money  is  advanced  without  the  intervention  of 
bills,  and  the  easy  manner  in  which  these  banks  accept  of 
repayment  (discounting  the  interest  as  each  sum  as  paid  in) 
are  peculiar  to  them.  The  operations  on  such  credits  are 
principally  carried  on  by  making  of  drafts,  or  passing  of 
checks,  as  if  the  banks  held  money  of  the  dealers.  The 
system  of  cash  accounts,  conducted  as  it  is  in  Scotland,  has 
been  the  principal  cause,  both  of  the  great  trade  of  the 
banking  companies  there,  and  of  the  great  benefits  which 
the  country  has  derived  from  them. 

5.  These  banks  are  of  much  use  in  collecting  the  great 
revenue  which  Scotland,  for  so  small  a  country,  produces, 
and  afterwards  remitting  it  to  the  English  treasury. 

6.  The  number  of  banks  is  a  great  check  upon  the  forge- 
ry of  notes,  which  can  hardly  escape  speedy  detection,  from 
the  rapidity  with  which  they  immediately  return  to  the  bank, 
or  the  branch  that  issued  them.*  And 

In  the  last  place,  a  number  of  banks  is  a  great  means  of 
securing  an  adequate  limitation.  No  bank,  with  a  number  of 
rivals,  can  issue  notes  beyond  the  real  demand ;  for  they  im- 
mediately revert  on  the  issues.  No  inordinate  circulation 
can  take  place  where  the  several  banRs  make  weekly  ex- 
changes, and  receive  payment  of  the  balances  in  cash,  or  by 
bills,  at  short  dates  on  London. 

But  the  most  extraordinary  circumstance  is  this,  that  with 
twenty-six  banks  issuing  notes,  there  has  not  been,  since  the 
year  1776,  a  period  of  fifty-six  years,  a  single  failure,  with 
the  exception  of  one,t  where  the  stopping  occasioned  any 
general  alarm,  as  is  so  frequently  in  England  or  Ireland  ;  or 

*  The  more  extended  the  circulation  of  a  bank,  the  more  liable  it  is  to  have 
its  notes  forged. 

t  This  was  the  Ayr  Bank,  or  Douglas,  Heron,  and  Company,  which  stopped 
in  the  year  1772,  but  which  was  never  declared  bankrupt,  and  which  ulti- 
mately paid  all  its  notes  and  other  demands  upon  it.  The  ruin  of  that  bank 
was  owing  to  the  grossest  mismanagement ;  and  its  failure  occasioned  a 
general  alarm  and  much  private  distress. 


BANKING  SYSTEM  OF  SCOTLAND.  46 

any  discredit  thrown  on  the  other  banks  by  whom  notes 
were  issued.  As  to  public  loss,  hardly  any  has  been  expe- 
rienced, even  where  a  stoppage  did  take  place,  of  which, 
in  fifty  years,  there  were  only  six  instances  ;  whereas,  in  Eng- 
land, seventy-one  banks  stopped  in  one  year. 

On  the  whole  the  banking  establishments  of  Scotland 
produce  the  finest  specimens  of  practical  economy  to  be  met 
with  in  Europe :  for  though,  in  the  circulation  of  Scotland, 
scarcely  any  gold  is  to  be  met  with,  yet  industry,  agriculture, 
manufactures,  and  commerce,  flourish  more  than  if  the  pro- 
duce of  all  the  mines  of  Mexico  and  Peru  were  circulated  in 
it.  If  the  same  system  of  banking  establishments  which 
Scotland  now  enjoys  were  extended  to  England  and  Ire- 
land, these  countries  possessing  such  a  superiority  of  soil  and 
climate,  would  rise  to  a  degree  of  prosperity  hitherto  unex- 
ampled. 

It  evidently  appears,  from  the  preceding  short  account  of 
the  circulation  of  Scotland,  that  the  advantages  of  which  it 
is  productive  is  a  matter  not  of  speculation,  but  of  experi- 
ence ;  for  it  has  now  been  carried  on  with  almost  uninter- 
rupted success  for  above  half  a  century,  and  during  periods 
of  considerable  commercial  as  well  as  political  difficulty. 

It  would  be  of  great  public  importance,  if  the  Bank  of  Eng- 
land adopted  the  plan  that  has  been  found  so  useful  in  Scot- 
land, that  of  granting  "  cash  accounts?  the  nature  of  which 
is  this :  a  bond,  say  for  one  thousand  pounds,  is  subscribed  by 
one  responsible  person,  and  two  or  more  sureties,  to  the  ex- 
tent of  that  sum  ;  the  principal  in  the  bond  is  entitled  to  draw 
as  he  may  find  it  necessary,  and  he  pays  in,  from  time  to  time, 
such  sums  as  he  receives  from  his  debtors.  The  account  is 
settled  yearly,  or  half  yearly  ;  and  the  interest,  at  the  rate 
of  five  per  cent,  for  the  sum  drawn  out,  beyond  what  is  peri- 
odically paid  in,  is  charged  to  his  debit  in  the  new  account. 
It  is  calculated  in  the  Scotch  banks,  that  about  one  third  part 
of  the  sum  advanced  to  their  customers,  is  issued  on  cash  ac- 
counts. This  furnishes  a  most  useful  means  of  augmenting 


46  BANKING  SYSTEM  OF  SCOTLAND. 

a  paper  currency,  being  entirely  independent  of  commercial 
discounts, — equally,  if  not  more  secure, — and  where  the  notes 
issued  are  likely  to  remain  longer  in  circulation.  In  this 
way,  persons  unconnected  with  trade,  may  be  accommodated  ; 
and  by  this  new  source  of  circulation,  the  Bank  of  England 
might  become  as  useful  to  the  agricultural  class  of  the  com- 
munity, as  originally  it  was  intended  to  have  been,  when  it 
was  anticipated  that  it  would  render  "  the  gentry  rich,  and 
the  farmer  flourishing." 

Dr.  Adam  Smith,  in  his  "  Wealth  of  Nations,"  (book  ii. 
chap.  2.)  has  taken  some  trouble  to  explain  the  advantages  of 
granting  these  credits,  which  he  considers  to  be,  perhaps,  the 
principal  cause,  both  of  the  great  trade  and  circulation  of 
these  banking  companies,  and  of  the  benefit  which  the  coun- 
try has  derived  from  them.  With  the  advantage  of  such  a 
credit,  he  observes  that  a  merchant  can,  without  any  impru- 
dence, have  at  all  times  in  his  warehouse  a  larger  quantity  of 
goods  than  otherwise  he  could  venture  upon  ;  and  can  thereby 
make  both  a  greater  profit  himself,  and  give  constant  employ- 
ment to  a  greater  number  of  industrious  people,  who  prepare 
his  goods  for  the  market. 

In  a  recent  publication,*  the  nature  of  these  credits  is  more 
minutely  explained.  Such  credits,  we  are  informed,  merely 
give  the  option  to  the  principal  in  the  bond,  of  drawing  out 
upon  interest,  the  notes  of  the  bank  ;  and  the  very  great 
proportion  of  these  credits  are  frequently  unused,  from  the  in- 
ability of  the  parties  to  employ  the  money  profitably.  The 
bankers  exercise  due  deliberation  before  any  credit  of  this 
kind  is  granted;  and  as  it  is  generally  found  to  exist  for  a 
considerable  number  of  years,  it  is  only  given  upon  such  se- 
curity as  is  likely  to  continue  permanently  good  for  their 
amount.  The  bank  account  of  the  principal  is  always  open 
to  the  inspection  of  the  sureties,  who  may  withdraw  their 
guaranty,  if  the  principal  is  mismanaging  or  imprudent. 

*  Muir's  Review  of  the  Banking  System  of  Great  Britain. 


BANKING  SYSTEM  OP  SCOTLAND.    •  47 

The  sureties  are  also  liable  for  bill  transactions  with  the  bank, 
to  the  amount  of  the  whole  sum  subscribed,  but  no  further. 
Among  the  many  numerous  advantages  attending  credit  ac- 
counts, they  enable  many  to  enter  upon  useful  undertakings, 
requiring  outlay  for  a  considerable  period,  who  might  other- 
wise have  been  unable,  or  afraid  to  do  so.  If  a  young  man 
gets  his  sureties  to  sign  a  bill  at  three  or  four  months  date, 
instead  of  signing  a  bond  for  a  credit  account,  he  must  be 
dependent  upon  the  caprice  or  convenience  of  the  bank 
for  its  renewal  for  such  periods  as  might  be  desirable,  in  any 
protracted  operations  he  may  have  embarked  in,  upon  the 
faith  of  this  credit  by  bills  ;  whereas  in  the  case  of  bonds, 
the  banks  seldom  if  ever  call  them  up,  so  long  as  the  principal 
continues  to  keep  an  operative  account,  or  the  sureties  and 
himself  remain  good  for  the  amount.  At  all  events  it  is  pro- 
vided for  in  the  bond,  that  such  warning  shall  be  given  before 
it  is  put  in  force,  as  may  enable  the  parties  to  get  a  similar 
accommodation  at  some  other  bank,  or  to  dispose  of  their 
property,  without  the  disadvantages  of  sudden  or  pressing  de- 
mands for  repayment.  Since  the  act  of  George  3,  c.  74., 
cash  credits  have  been  frequently  granted  on  the  security  of 
lands,  and  this  practice  might  certainly  be  greatly  extended 
with  much  public  benefit. 

On  the  whole,  the  granting  of  cash  accounts  cannot  be  too 
strongly  recommended  to  the  attention  of  the  Bank  of  Eng- 
land. If  the  plan  were  adopted,  it  might  resolve  to  discount 
bills  under  60  days  at  4  per  cent. :  and  all  bills  of  a  longer 
duration  at  4i  per  cent. — and  might  charge  5  per  cent,  on  all 
money  advanced  on  cash  accounts.  This  would  place  the 
system  of  granting  loans  or  credits  on  the  most  advantageous 
footing  possible,  and  would  prove  equally  beneficial  to  the 
bank  and  to  the  public.* 

*  From  the  author's  experience  as  a  director  of  the  Bank  of  Scotland,  he  is 
fully  satisfied  of  the  great  advantages  derivable  from  cash  accounts. 


48  BANK  OP  NORTH  AMERICA. 

The  preceding  article  leaves  nothing  to  be  wished  for,  as 
well  with  regard  to  the  history  of  the  most  prominent  bank- 
ing institutions  in  Europe,  as  to  the  correctness  of  the  general 
view  of  these  operations,  and  their  beneficial  influence  on  in- 
dustry and  commerce. 

We  now  proceed  to  detail  the  institutions  of  the  United 
States. 

The  first  of  these  is  the  BAN^XOF  NORTH  AMERICA.  It 
owes  its  origin  to  the  vigorous  mind  and  enterprising  genius 
of  Robert  Morris,  Esq.  who  conceived  the  idea  of  it  when 
superintendent  of  the  public  finances,  and  submitted  to  con- 
gress in  the  month  of  May,  in  the  year  1781,  the  plan  for 
establishing  a  national  bank  of  North  America. 

Agreeably  to  this  plan,  the  capital  was  to  consist  of  1000 
shares,  of  $400  each,  $400,000, 

payable  in  gold  and  silver,  to  be  increased  by  new  subscrip- 
tions, from  time  to  time,  at  the  pleasure  of  the  directors.  The 
directors,  twelve  in  number,  were  to  be  chosen  by  the  stock- 
holders, and  were  to  be  intrusted  with  the  management  of 
the  institution.  The  notes  of  the  bank,  payable  on  demand, 
to  be  made  a  legal  tender  in  the  discharge  of  duties  and 
taxes,  &c.  On  the  26th  May,  of  the  same  year,  congress 
approved  of  the  plan,  and  passed  several  resolutions,  by 
which  they  pledged  themselves  to  support  the  proposed  insti- 
tution ;  to  incorporate  the  subscribers,  under  the  name  of  the 
president,  directors,  and  company  of  the  Bank  of  North  Ame- 
rica ;  to  recommend  to  the  several  states  the  prevention  of 
similar  establishments  within  their  respective  jurisdictions, 
during  the  war ;  to  receive  the  notes  of  the  institution  in 
payment  of  taxes,  duties,  and  debts,  due  to  the  United  States, 
and  to  use  their  influence  with  the  several  legislatures,  to 
have  laws  passed,  which  should  make  it  felony  to  counterfeit 
the  notes  of  the  bank,  &c. 

After  this,  subscriptions  were  immediately  opened,  during 
the  summer  and  autumn  of  the  same  year.  In  November, 
directors  were  chosen.  In  December,  congress,  conformable 


HANK   OF   NORTH    AMKK1  49 

to  their  former  resolves,  passed  an  ordinance  which  created 
the  subscribers  to  the  bank  a  corporation  for  ever,  under  the 
title  of  "  The  President,  Directors,  and  Company  of  the  Bank 
of  North  America."  The  original  features  of  the  plan  were 
preserved,  but  the  bank  was  restricted  from  holding"  property 
exceeding  the  amount  of  $10,000,000. 

The  institution  commenced  its  operations  in  the  month  of 
January  following,  and  Robert  Morris,  who  may  be  justly 
styled  the  father  of  the  system  of  credit,  and  paper  circu- 
lation, in  the  United  States,  succeeded  in  securing  to  it  the 
good  will  and  confidence  of  the  people  at  large,  by  various 
judicious  measures,  of  which  a  circular  letter,  addressed  to 
the  governors  of  the  several  states,  explaining  the  object  of 
the  institution,  and  the  certain  advantages  to  be  derived  from 
it,  was  not  the  least  effectual. '  Thus  the  first  bank  in  the 
United  States  came  into  existence,  and  such  was  its  happy 
and  immediate  influence  on  the  public  finances,  and  on  com- 
mercial concerns  in  general,  that  it  may  be  justly  doubted 
whether,  without  its  seasonable  aid,  the  revolutionary  struggle 
for  independence  could  have  been  brought  at  all  to  a  satis- 
factory termination.  The  United  States,  for  several  years, 
were  constantly  indebted  to  the  bank,  to  a  larger  sum  than 
the  stock  they  owned  ;  nor  could  the  various  devices  for  cre- 
ating a  revenue  have  answered  their  end,  or  the  army  have 
been  fed  and  clothed,  or  any  degree  of  order  and  punctuality 
maintained  in  the  dispatch  of  public  affairs,  but  for  the  great 
facility  in  the  management  of  business,  and  the  restoration  of 
confidence,  which  were  created  by  this  institution.  The 
sense  of  the  great  utility  of  the  bank,  was  so  universal,  that 
Massachusetts  and  Pennsylvania  corroborated  the  ordinances 
of  congress,  by  additional  charters,  and  Rhode  Island,  Con- 
necticut, and  Delaware  passed  laws  for  the  purpose  of  pre- 
venting the  counterfeiting  of  its  notes.  Yet  when  peace  had 
been  concluded,  and  the  pressure  of  the  times  was  over,  there 
were  not  wanting  those  who  viewed  the  prosperous  state  of 
the  affairs  of  the  bank  with  a  jealous  eye.  and  conjured  up 

7 


50  BANK  OF   NORTH  AMERICA- 

imaginary  fears  of  an  overbearing  oppression,  an  alarming 
foreign  influence,  and  fictitious  credit,  from  temporary  punc- 
tuality ;  of  a  created  scarcity  of  specie ;  possible  commercial 
convulsions,  from  the  stopping  of  discounts  ;  partial  favors, 
and  comparative  disadvantages,  under  which  distant  traders 
labored  :  as  if,  in  a  moral  community,  the  bare  possibility  of 
abuse  could  ever  furnish  a  good  argument  against  the  decided 
utility  of  a  thing  ;  or  as  if  a  benefit  were  to  be  relinquished, 
because  all  cannot  be  benefited  alike.  And  so  effectually 
were  these  objections  against  the  institution  urged,  that  on 
the  13th  of  September,  1785,  the  legislature  of  Pennsylvania 
actually  repealed  their  charter  ! 

The  repeal  was  persevered  in  by  the  succeeding  legisla- 
lature,  notwithstanding  innumerable  petitions  to  the  contrary, 
and  vast  efforts  to  enlighten  their  proceedings. 

The  bank,  however,  continued  its  usual  operations  under 
the  charter  from  congress,  and  in  the  enjoyment  of  corpo- 
rate rights,  which,  it  was  presumed,  could  not  be  arbitrarily 
wrested  from  them,  after  having  been  once  legally  bestowed. 

The  legislature  which  met  in  December,  1786,  at  last 
thought  proper  to  renew  the  charter  of  the  bank,  and  passed 
an  act  to  that  effect,  on  the  7th  March,  1787,  by  which,  how- 
ever, the  term  of  the  charter  was  limited  to  fourteen  years, 
and  the  capacity  of  the  corporate  body  of  holding  property, 
restricted  to  two  millions  of  dollars.  The  same  charter  was 
extended  for  the  term  of  fourteen  years  more,  by  an  act 
passed  on  the  20th  March,  1799. 

The  capital  of  this  bank  has  been  from  time  to  time  in- 
creased. It  is  now  2,000  shares  of  $400  each— $800,000, 
It  has  usually  divided  12  per  cent,  on  the  original  price  of  the 
shares  ;  which,  taking  the  medium  capital  from  the  com- 
mencement, will  make  the  sum  total  of  the  dividend  amount 

to  $3,456,000. 

Thus  has  this  institution  existed  under  the  double  security 
of  a  perpetual  charter  from  congress,  and  a  charter  from  the 
states,  with  laws  in  its  favor  from  several  states,  after  having 


HAMILTON':-    UI:I'«»RT.  51 

sustained  the  burden  and  heat  of  the  days  of  a  triumphant 
revolutionary  struggle — continued  for  nearly  half  a  century, 
and  is  now  a  flourishing  institution, 


REPORT  OF  ALEXANDER  HAMILTON, 

(WHILE  SECRETARY  OF  THE  TREASURY,) 


0>rlTHE    SUBJECT  OF 


A    NATIONAL    BANK. 

Read  in  the  House  of  Representatives,  Dec.  13th,  1790, 


Treasury  Department,  Dec.  13. 1790. 

• 

IN  obedience  to  the  order  of  the  HOUSE  OF  REPRESENTA- 
TIVES, of  the  ninth  day  of  August  last,  requiring-  the 
SECRETARY  OF  THE  TREASURY  to  prepare  and  report, 
on  this  day,  such  further  provision  as  may,  in  his 
opinion,  be  necessary  for  establishing  the  PUBLIC 
CREDIT— the  said  Secretary  further 

RESPECTFULLY  REPORTS, 

THAT,  from  a  conviction  that  a  National  Bank  is  an  in- 
stitution of  primary  importance  to  the  prosperous  administra- 
tion of  the  finances,  and  would  be  of  the  greatest  utility  in 
the  operations  connected  with  the  support  of  the  public  credit, 
his  attention  has  been  drawn  to  devising  the  plan  of  such  an 
institution,  upon  a  scale  which  will  entitle  it  to  the  confi- 
dence, and  be  likely  to  render  it  equal  to  the  exigencies,  of 
the  public. 


52  HAMILTON'S  REPORT. 

Previously  to  entering  upon  the  detail  of  this  plan,  he  en- 
treats the  indulgence  of  the  house,  towards  some  prelimina- 
ry reflections  naturally  arising  out  of  the  subject,  which  he 
hopes  will  be  deemed  neither  useless  nor  out  of  place.  Pub- 
lic opinion  being  the  ultimate  arbiter  of  every  measure  of 
government,  it  can  scarcely  appear  improper,  in  deference  to 
that,  to  accompany  the  origination  of  any  new  proposition 
with  explanations,  which  the  superior  information  of  those  to 
whom  it  is  immediately  addressed,  would  render  super- 
fluous. 

It  is  a  fact  well  understood,  that  public  banks  have  found 
admission  and  patronage  among  the  principal  and  most  en- 
lightened commercial  nations.  They  have  successively  ob- 
tained in  Italy,  Germany,  Holland,  England,  and  France, 
as  well  as  in  the  United  States.  And  it  is  a  circumstance 
which  cannot  but  have  considerable  weight,  in  a  candid  esti- 
mate of  their  tendency,  that,  after  an  experience  of  centu- 
ries, there  exists  not  a  question  about  their  utility  in  the 
countries  in  which  they  have  been  so  long  established. 
Theorists  and  men  of  business  unite  in  the  acknowledgment 
of  it. 

Trade  and  industry,  wherever  they  have  been  tried,  have 
been  indebted  to  them  for  important  aid.  And  government 
has  been  repeatedly  under  the  greatest  obligations  to  them,  in 
dangerous  and  distressing  emergencies.  That  of  the  United 
States,  as  well  in  some  of  the  most  critical  conjunctures  of 
the  late  war,  as  since  the  peace,  has  received  assistance  from 
those  established  among  us,  with  which  it  could  not  have 
dispensed. 

With  this  two-fold  evidence  before  us,  it  might  be  expected, 
that  there  would  be  a  perfect  union  of  opinions  in  their  fa- 
vor. Yet  doubts  have  been  entertained  ;  jealousies  and  pre- 
judices have  circulated  ;  and  though  the  experiment  is  every 
day  dissipating  them,  within  the  spheres  in  which  effects  are 
best  known  ;  yet  there  are  still  persons  by  whom  they  have 
not  been  entirely  renounced.  To  give  a  full  and  accurate 


Qi 

view  of  the  subject,  would  be  to  make  a  treatise  of  a  report; 
but  there  are  certain  aspects  in  which  it  may  be  cursorily  ex- 
hibited, which  may  perhaps  conduce  to  a  just  impression  of 
its  merits.  These  will  involve  a  comparison  of  the  advan- 
tages, with  the  disadvantages,  real  or  supposod,  of  such  insti- 
tutions. 

The  following  are  among  the  principal  advantages  of  a 
bank  : 

First.  The  augmentation  of  the  active  or  productive  capi- 
tal of  a  country.  Gold  and  silver,  where  they  are  employed 
merely  as  the  instruments  of  exchange  and  alienation,  have 
been,  not  improperly,  denominated  dead  stock ;  but  when 
deposited  in  banks,  to  become  the  basis  of  a  paper  circula- 
tion, which  takes  their  character  and  place,  as  the  signs  or 
representatives  of  value,  they  then  acquire  life,  or,  in  other 
words,  an  active  and  productive  quality.  This  idea,  which 
appears  rather  subtile  and  abstract,  in  a  general  form,  may 
be  made  obvious  and  palpable,  by  entering  into  a  few  par- 
ticulars. It  is  evident,  for  instance,  that  the  money  which  a 
merchant  keeps  in  his  chest,  waiting  for  a  favorable  oppor- 
tunity to  employ  it,  produces  nothing  till  that  opportunity 
arrives.  But  if,  instead  of  locking  it  up  in  this  manner,  he 
either  deposits  it  in  a  bank,  or  invests  it  in  the  stock  of  a 
bank,  it  yields  a  profit  during  the  interval,  in  which  he  par- 
takes or  not,  according  to  the  choice  he  may  have  made  of 
being  a  depositor  or  a  proprietor  ;  and  when  any  advanta- 
geous speculation  offers,  in  order  to  be  able  to  embrace  it,  he 
has  only  to  withdraw  his  money,  if  a  depositor  ;  or  if  a  pro- 
prietor, to  obtain  a  loan  from  the  bank,  or  to  dispose  of  his 
stock  ;  an  alternative  seldom  or  never  attended  with  difficul- 
ty, when  the  affairs  of  the  institution  are  in  a  prosperous 
train.  His  money  thus  deposited  or  invested,  is  a  fund  upon 
which  himself  and  others  can  borrow  to  a  much  larger 
amount.  It  is  a  well  established  fact,  that  banks  in  good 
credit  can  circulate  a  far  greater  sum  than  the  actual  quan- 
tum of  their  capital  in  gold  and  silver.  The  extent  of  the 


possible  excess  seems  indeterminate  ;  though  it  has  been  con  - 
jecturally  stated  at  the  proportions  of  two  and  three  to  one. 
This  faculty  is  produced  in  various  ways.  First — A  great  pro- 
portion of  the  notes  which  are  issued,  and  pass  current  as 
cash,  are  indefinitely  suspended  in  circulation,  from  the  con- 
fidence which  each  holder  has,  that  he  can  at  any  moment 
turn  them  into  gold  and  silver.  Secondly — Every  loan 
which  a  bank  makes,  is,  in  its  first  shape,  a  credit  given  to 
the  borrower  on  its  books,  the  amount  of  which  it  stands 
ready  to  pay,  either  in  its  own  notes,  or  in  gold  or  silver,  at 
his  option.  But,  in  a  great  number  of  cases,  no  actual  pay- 
ment is  made  in  either.  The  borrower  frequently,  by  a  check 
or  order,  transfers  his  credit  to  some  other  person,  to  whom 
he  has  a  payment  to  make  ;  who,  in  his  turn,  is  as  often 
content  with  a  similar  credit,  because  he  is  satisfied  that  he 
can,  whenever  he  pleases,  either  convert  it  into  cash,  or  pass 
it  to  some  other  hand,  as  an  equivalent  for  it.  And  in  this 
manner  the  credit  keeps  circulating,  performing,  in  every 
stage,  the  office  of  money,  till  it  is  extinguished  by  a  discount 
with  some  person  who  has  a  payment  to  make  to  the  bank, 
to  an  equal  or  greater  amount.  Thus  large  sums  are  lent 
and  paid,  frequently  through  a  variety  of  hands,  without  the 
intervention  of  a  single  piece  of  coin.  Thirdly — There  is 
always  a  large  quantity  of  gold  and  silver  in  the  repositories 
of  the  bank,  besides  its  own  stock,  which  is  placed  there  with 
a  view,  partly  to  its  safe  keeping,  and  partly  to  the  accom- 
modation of  an  institution,  which  is  itself  a  source  of  general 
accommodation.  These  deposits  are  of  immense  consequence 
in  the  operations  of  a  bank.  Though  liable  to  be  redrawn  at 
any  moment,  experience  proves,  that  the  money  so  much 
oftener  changes  proprietors  than  place,  and  that  what  is 
drawn  out  is  generally  so  speedily  replaced,  as  to  authorize 
the  counting  upon  the  sums  deposited,  as  an  effective  fund  ; 
which,  concurring  with  the  stock  of  the  bank,  enables  it  to 
extend  its  loans?,  and  to  answer  all  the  demands  for  coin. 


HAMILTON  S  REPORT.  55 

whether  in  consequence  of  those  loans,  or  arising  from  the 
occasional  return  of  its  notes. 

These  different  circumstances  explain  the  manner  in 
which  the  ability  of  a  bank  to  circulate  a  greater  sum  than 
its  actual  capital  in  coin,  is  acquired.  This,  however,  must 
be  gradual ;  and  must  be  preceded  by  a  firm  establishment  of 
confidence ;  a  confidence  which  may  be  bestowed  on  the  most 
rational  grounds  ;  since  the  excess  in  question  will  always 
be  bottomed  on  good  security  of  one  kind  or  another.  This 
every  well  conducted  bank  carefully  requires,  before  it  will 
consent  to  advance  either  its  money  or  its  credit ;  and  where 
there  is  an  auxiliary  capital,  (as  will  be  the  case  in  the  plan 
hereafter  submitted,)  which,  together  with  the  capital  in  coin, 
define  the  boundary  that  shall  not  be  exceeded  by  the  en- 
gagements of  the  bank,  the  security  may,  consistently  with 
all  the  maxims  of  a  reasonable  circumspection,  be  regarded 
as  complete. 

The  same  circumstances  illustrate  the  truth  of  the  position, 
that  it  is  one  of  the  properties  of  banks  to  increase  the  .active 
capital  of  a  country.  This,  in  other  words,  is  the  sum  of 
them — The  money  of  one  individual,  while  he  is  waiting 
for  an  opportunity  to  employ  it,  by  being  either  deposited  in 
the  bank  for  safe  keeping,  or  invested  in  its  stock,  is  in  a 
condition  to  administer  to  the  wants  of  others,  without  being 
put  out  of  his  own  reach,  when  occasion  presents.  This 
yields  an  extra  profit,  arising  from  what  is  paid  for  the  use  of 
his  money  by  others,  when  he  could  not  himself  make  use 
of  it ;  and  keeps  the  money  itself  in  a  state  of  incessant  ac- 
tivity. In  the  almost  infinite  vicissitudes  and  competitions 
of  mercantile  enterprise,  there  never  can  be  danger  of  an  in- 
termission of  demand,  or  that  the  money  will  remain  for  a 
moment  idle  in  the  vaults  of  the  bank.  This  additional  em- 
ployment given  to  money,  and  the  faculty  of  a  bank  to  lend 
and  circulate  a  greater  sum  than  the  amount  of  its  stock  in 
coin,  are,  to  all  the  purposes  of  trade  and  industry,  an  abso- 
lute increase  of  capital.  Purchases  and  undertaking?,  in 


56 

general,  can  be  carried  on  by  any  given  sum  of  bank  paper 
or  credit,  as  effectually  as  by  an  equal  sum  of  gold  and  silver. 
And  thus  by  contributing  to  enlarge  the  mass  of  industrious 
and  commercial  enterprise,  banks  become  nurseries  of  na- 
tional wealth  :  a  consequence,  as  satisfactorily  verified  by  ex- 
perience, as  it  is  clearly  deducible  in  theory. 

Secondly.  Greater  facility  to  the  government  in  obtaining 
pecuniary  aids,  especially  in  sudden  emergencies.  This  is 
another,  and  an  undisputed  advantage  of  public  banks  ;  one 
which,  as  already  remarked,  has  been  realized  in  signal  in- 
stances among  ourselves.  The  reason  is  obvious  :  The  ca- 
pitals of  a  great  number  of  individuals  are,  by  this  operation, 
collected  to  a  point,  and  placed  under  one  direction.  The 
mass  formed  by  this  union  is,  in  a  certain  sense,  magnified 
by  the  credit  attached  to  it.  And  while  this  mass  is  always 
ready,  and  can  at  once  be  put  in  motion  in  aid  of  the  govern- 
ment, the  interest  of  the  bank  to  afford  that  aid,  independent 
of  regard  to  the  public  safety  and  welfare,  is  a  sure  pledge  for 
its  disposition  to  go  as  far  in  its  compliances,  as  can  in  pru- 
dence be  desired.  There  is  in  the  nature  of  things,  as  will 
be  more  particularly  noticed  in  another  place,  an  intimate  con- 
nection of  interest  between  the  government  and  the  bank  of 
a  nation. 

Thirdly.  The  facilitating  of  the  payment  of  taxes.  This 
advantage  is  produced  in  two  ways.  Those  who  are  in  a 
situation  to  have  access  to  the  bank,  can  have  the  assistance 
of  loans  to  answer  with  punctuality  the  public  calls  upon 
them.  This  accommodation  has  been  sensibly  felt  in  the 
payment  of  the  duties  heretofore  laid,  by  those  who  reside 
where  establishments  of  this  nature  exist.  This,  however, 
though  an  extensive,  is  not  a  universal  benefit.  The  other 
way  in  which  the  effect  here  contemplated  is  produced,  and 
in  which  the  benefit  is  general,  is  the  increasing  of  the  quan- 
tity of  circulating  medium,  and  the  quickening  of  circula- 
tion. The  manner  in  which  the  first  happens,  has  already 
been  traced.  The  last  may  require  some  illustration.  When 


HAMILTONS  REPORT.  & 

payments  are  to  be  made  between  different  places,  having  an 
intercourse  of  business  with  each  other,  if  there  happen  to 
be  no  private  bills  at  market,  and  there  are  no  bank  notes 
which  have  a  currency  in  both,  the  consequence  is,  that  coin 
must  be  remitted.  This  is  attended  with  trouble,  delay,  ex- 
pense, and  risk.  If,  on  the  contrary,  there  are  bank  notes 
current  in  both  places,  the  transmission  of  these  by  the  post, 
or  any  other  speedy  or  convenient  conveyance,  answers  the 
purpose  ;  and  these  again,  in  the  alternations  of  demand,  are 
frequently  returned  very  soon  after  to  the  place  from  whence 
they  were  first  sent ;  whence  the  transportation  and  retrans- 
portation  of  the  metals  are  obviated,  and  a  more  convenient, 
and  more  expeditious  medium  of  payment  is  substituted. 
Nor  is  this  all — the  metals,  instead  of  being  suspended  from  their 
Usual  functions,  during  this  process  of  vibration  from  place  to 
place,  continue  in  activity,  and  administer  still  to  the  ordi- 
nary circulation  ;  which  of  course  is  prevented  from  suffer- 
ing either  diminution  or  stagnation.  These  circumstances 
are  additional  causes  of  what,  in  a  practical  sense,  or  to  the 
purposes  of  business,  may  be  called  greater  plenty  of  money. 
And  it  is  evident,  that  whatever  enhances  the  quantity  of 
circulating  money,  adds  to  the  ease  with  which  every  indus- 
trious member  of  the  community  may  acquire  that  portion  of 
it  of  which  he  stands  in  need  ;  and  enables  him  the  better  to 
pay  his  taxes,  as  well  as  to  supply  his  other  wants.  Even 
where  the  circulation  of  the  bank  paper  is  not  general,  it 
must  still  have  the  same  effect,  though  in  a  less  degree.  FoT 
whatever  furnishes  additional  supplies  to  the  channels  of  cir- 
culation, in  one  quarter,  naturally  contributes  to  keep  the 
streams  fuller  elsewhere.  This  last  view  of  the  subject,  serves 
both  to  illustrate  the  position,  that  banks  tend  to  facilitate 
the  payment  of  taxes,  and  to  exemplify  their  utility  to  busi- 
ness of  every  kind,  in  which  money  is  an  agent. 

It  would  be  to  intrude  too  much  on  the  patience  of  the 
house,  to  prolong  the  details  of  the  advantages  of  banks  ;  es- 
pecially as  all  those  which  might  still  be  particularized,  are 

8 


58  HAMILTON'S  REPORT. 

readily  to  be  inferred  as  consequences  from  those  which  have 
been  enumerated.  Their  disadvantages,  real  or  supposed, 
are  now  to  be  reviewed.  The  most  serious  of  the  charges 
which  have  been  brought  against  them,  are — 

That  they  serve  to  increase  usury  : 

That  they  tend  to  prevent  other  kinds  of  lending : 

That  they  furnish  temptations  to  overtrading  : 

That  they  afford  aid  to  ignorant  adventurers,  who  disturb 
the  natural  and  beneficial  course  of  trade : 

That  they  give  to  bankrupt  and  fraudulent  traders  a  fic- 
titious credit,  which  enables  them  to  maintain  false  appear- 
ances, and  to  extend  their  impositions  :  And  lastly, 

That  they  have  a  tendency  to  banish  gold  and  silver  from 
the  country. 

There  is  great  reason  to  believe,  that  on  a  close  and  candid 
survey,  it  will  be  discovered,  that  these  charges  are  either 
without  foundation,  or  that,  as  far  as  the  evils  they  suggest 
have  been  found  to  exist,  they  have  proceeded  from  other,  or 
partial,  or  temporary  causes  ;  are  not  inherent  in  the  nature, 
and  permanent  tendency,  of  such  institutions  ;  or  are  more 
than  counterbalanced  by  opposite  advantages.  This  survey 
shall  be  had,  in  the  order  in  which  the  charges  have  been 
stated.  The  first  of  them  is — 

That  banks  serve  to  increase  usury. 

It  is  a  truth,  which  ought  not  to  be  denied,  that  the  method 
of  conducting  business,  which  is  essential  to  bank  operations, 
has  among  us,  in  particular  instances,  given  occasion  to  usu- 
rious transactions.  The  punctuality  in  payments,  which  they 
necessarily  exact,  has  sometimes  obliged  those  who  have  ad- 
ventured beyond  both  their  capital  and  credit,  to  procure 
money,  at  any  price,  and  consequently  to  resort  fo  usurers 
for  aid. 

But  experience  and  practice  gradually  bring  a  cure  to  this 
evil.  A  general  habit  of  punctuality  among  traders,  is  the 
natural  consequence  of  the  necessity  of  observing  it  with  the 
bank  ;  a  circumstance  which  itself  more  than  compensates 


HAMILTONS  REPORT. 

for  any  occasional  ill  which  may  have  sprung  from  that  ne- 
cessity, in  the  particular  under  consideration.  As  far,  there- 
fore, as  traders  depend  on  each  other  for  pecuniary  supplies, 
they  can  calculate  their  expectations  with  greater  certainty  ; 
and  are  in  proportionally  less  danger  of  disappointments, 
which  might  compel  them  to  have  recourse  to  so  pernicious 
an  expedient  as  that  of  borrowing  at  usury ;  the  mischiefs  of 
which,  after  a  few  examples,  naturally  inspire  great  care  in 
all  but  men  of  desperate  circumstances,  to  avoid  the  possibi- 
lity of  being  subjected  to  them.  One,  and  not  the  least  of 
the  evils  incident  to  the  use  of  that  expedient,  if  the  fact  be 
known,  or  even  strongly  suspected,  is  loss  of  credit  with  the 
bank  itself. 

The  directors  of  a  bank  too,' though  in  order  to  extend  its 
business  and  its  popularity,  in  the  infancy  of  an  institution, 
they  may  be  tempted  to  go  further  in  accommodation  than 
the  strict  rules  of  prudence  will  warrant,  grow  more  circum- 
spect of  course,  as  its  affairs  become  better  established,  and  as 
the  evils  of  too  great  facility  are  experimentally  demon- 
strated. They  become  more  attentive  to  the  situation  and 
conduct  of  those  with  whom  they  deal ;  they  observe  more 
narrowly  their  operations  and  pursuits ;  they  economize  the 
credit  they  give  to  those  of  suspicious  solidity  ;  they  refuse  it 
to  those  whose  career  is  more  manifestly  hazardous  :  in  a 
word,  in  the  course  of  practice,  from  the  very  nature  of  things, 
the  interest  will  make  it  the  policy  of  a  bank,  to  succor  the 
wary  and  industrious ;  to  discredit  the  rash  and  unthrifty  ; 
to  discountenance  both  usurious  lenders  and  usurious  bor- 
rowers. 

There  is  a  leading  view,  in  which  the  tendency  of  banks 
will  be  seen  to  be,  to  abridge,  rather  than  to  promote,  usury. 
This  relates  to  their  property  of  increasing  the  quantity,  and 
quickening  the  circulation,  of  money.  If  it  be  evident,  that 
usury  will  prevail  or  diminish,  according  to  the  proportion 
which  the  demand  for  borrowing  bears  to  the  quantity  of 
money  at  market  to  be  lent ;  whatever  has  the  property  just 


*JO  HAMILTON'S  REPORT. 

mentioned,  whether  it  be  in  the  shape  of  paper  or  coin,  by 
contributing  to  render  the  supply  more  equal  to  the  demand, 
must  tend  to  counteract  the  progress  of  usury. 

But  bank  lending,  it  is  pretended,  is  an  impediment  to 
other  kinds  of  lending  ;  which,  .by  confining  the  resource  of 
borrowing  to  a  particular  class,  leaves  the  rest  of  the  commu- 
nity more  destitute,  and  therefore  more  exposed  to  the  extor- 
tions of  usurers.  As  the  profits  of  bank  stock  exceed  the  le- 
gal rate  of  interest,  the  possessors  of  money,  it  is  argued,  prefer 
investing  it  in  that  article,  to  lending  it  at  this  rate  ;  to  which 
there  are  the  additional  motives  of  a  more  prompt  command 
of  the  capital,  and  of  more  frequent  and  exact  returns,  with- 
out trouble  or  perplexity  in  the  collection.  This  constitutes 
the  second  charge  which  has  been  enumerated. 

The  fact  on  which  this  charge  rests,  is  not  to  to  be  admit- 
ted without  several  qualifications  ;  particularly  in  reference 
to  the  state  of  things  in  this  country.  First — The  great 
bulk  of  the  stock  of  a  bank,  will  consist  of  the  funds  of  men 
in  trade,  among  ourselves,  and  moneyed  foreigners ;  the  former 
of  whom  could  not  spare  their  capitals  out  of  their  reach,  to 
be  invested  in  loans  for  long  periods,  on  mortgages  or  personal 
security  ;  and  the  latter  of  whom  would  not  be  willing  to  be 
subjected  to  the  casualties,  delays,  and  embarrassments,  of 
such  a  disposition  of  their  money  in  a  distant  country. 
Secondly,  There  will  always  be  a  considerable  proportion  of 
those  who  are  properly  the  money  lenders  of  a  country,  who, 
from  that  spirit  of  caution  which  usually  characterizes  this 
description  of  men,  will  incline  rather  to  vest  their  funds  in 
mortgages  on  real  estate,  than  in  the  stock  of  a  bank,  which 
they  are  apt  to  consider  as  a  more  precarious  security. 

These  considerations  serve  in  a  material  degree  to  narrow 
the  foundation  of  the  objection,  as  to  the  point  of  fact.  But 
there  is  a  more  satisfactory  answer  to  it.  The  effect  sup- 
posed, as  far  as  it  has  existence,  is  temporary.  The  reverse 
of  it  takes  place  in  the  general  and  permanent  operation  of 
the  thing. 


HAMILTON'S  REPORT.  M 

The  capital  of  every  public  bank  will  of  course  be  re- 
stricted within  a  certain  defined  limit.  It  is  the  province  of 
legislative  prudence  so  to  adjust  this  limit,  that  while  it  will  not 
be  too  contracted  for  the  demand,  which  the  course  of  busi- 
ness may  create,  and  for  the  security  which  the  public  ought 
to  have  for  the  solidity  of  the  paper  which  may  be  issued  by 
the  bank,  it  will  still  be  within  the  compass  of  the  pecuniary 
resources  of  the  community  ;  so  that  there  may  be  an  easy 
practicability  of  completing  the  subscriptions  to  it.  When 
this  is  once  done,  the  supposed  effect  of  necessity  ceases. 
There  is  then  no  longer  room  for  the  investment  of  any  ad- 
ditional capital.  Stock  may  indeed  change  hands  by  one 
person  selling  and  another  buying ;  but  the  money  which  the 
buyer  takes  out  of  the  common  mass  to  purchase  the  stock, 
the  seller  receives  and  restores  to  it.  Hence  the  future  sur- 
pluses which  may  accumulate  must  take  their  natural 
course,  and  lending  at  interest  must  go  on  as  if  there  were  no 
such  institution. 

It  must  indeed  flow  in  a  more  copious  stream.  The  bank 
furnishes  an  extraordinary  supply  for  borrowers,  within  its 
immediate  sphere.  A  larger  supply  consequently  remains 
for  borrowers  elsewhere.  In  proportion  as  the  circulation  of 
the  bank  is  extended,  there  is  an  augmentation  of  the  aggre- 
gate mass  of  money  for  answering  the  aggregate  mass  of  de- 
mand. Hence  greater  facility  in  obtaining  it  for  every  pur- 
pose. 

It  ought  not  to  escape  without  a  remark,  that  as  far  as  the 
citizens  of  other  countries  become  adventurers  in  the  bank, 
there  is  a  positive  increase  of  the  gold  and  silver  of  the 
country.  It  is  true,  that  from  this  a  half-yearly  rent  is  drawn 
back,  accruing  from  the  dividends  upon  the  stock  :  but  as  this 
rent  arises  from  the  employment  of  the  capital,  by  our  own 
citizens,  it  is  probable,  that  it  is  more  than  replaced  by  the 
profits  of  that  employment.  It  is  also  likely,  that  a  part  of  it 
is.  in  the  course  of  trade,  converted  into  the  products  of  our 


62  HAMILTON'S  REPORT. 

country  :  and  it  may  even  prove  an  incentive,  in  some  cases, 
to  emigration  to  a  country  in  which  the  character  of  citizen 
is  as  easy  to  be  acquired,  as  it  is  estimable  and  important. 
This  view  of  the  subject  furnishes  an  answer  to  an  objection 
which  has  been  deduced  from  the  circumstance  here  taken 
notice  of ;  namely,  the  income  resulting  to  foreigners  from  the 
part  of  the  stock  owned  by  them,  which  has  been  repre- 
sented as  tending  to  drain  the  country  of  its  specie.  In  this 
objection,  the  original  investment  of  the  capital,  and  the  con- 
stant use  of  it  afterwards,  seem  both  to  have  been  overlooked. 

That  banks  furnish  temptations  to  overtrading,  is  the  third 
of  the  enumerated  objections.  This  must  mean,  that  by  af- 
fording additional  aid  to  mercantile  enterprise,  they  induce 
the  merchant  sometimes  to  adventure  beyond  the  prudent  or 
salutary  point.  But  the  very  statement  of  the  thing  shows, 
that  the  subject  of  the  charge  is  an  occasional  ill,  incident  to 
a  general  good.  Credit  of  every  land,  (as  a  species  of  which 
only  can  bank-lending  have  the  effect  supposed,)  must  be,  in 
different  degrees,  chargeable  with  the  same  inconvenience.  It 
is  even  applicable  to  gold  and  silver,  when  they  abound  in 
circulation.  But  would  it  be  wise  on  this  account  to  decry 
the  precious  metals ;  to  root  out  credit  ;  or  to  prescribe  the 
means  of  that  enterprise,  which  is  the  main  spring  of  trade, 
and  a  principal  source  of  national  wealth,  because  it  now 
and  then  runs  into  excesses,  of  which  overtrading  is  one  ? 

If  the  abuses  of  a  beneficial  thing,  are  to  determine  its 
condemnation,  there  is  scarcely  a  source  of  public  prosperity 
which  will  not  speedily  be  closed.  In  every  case,  the  evil  is 
to  be  compared  with  the  good  ;  and  in  the  present  case,  such 
a  comparison  will  issue  in  this,  that  the  new  and  increased 
energies  derived  to  commercial  enterprise,  from  the  aid  of 
banks,  are  a  source  of  general  profit  and  advantage ;  which 
greatly  outweigh  the  partial  ills  of  the  overtrading  of  a  few 
individuals,  at  particular  times,  or  of  numbers  in  particular 
conjunctures. 


HAMILTON'S  REPORT.  63 

The  fourth  and  fifth  charges  may  be  considered  together  : 
These  relate  to  the  aid  which  is  sometimes  afforded  by  banks 
to  unskillful  adventurers  and  fraudulent  traders.  These 
charges  also  have  some  degree  of  foundation,  though  far 
less  than  has  been  pretended  ;  and  they  add  to  the  instances 
of  partial  ills,  connected  with  more  extensive  and  overba- 
lancing benefits. 

The  practice  of  giving  fictitious  credit  to  improper  persons, 
is  one  of  those  evils  which  experience,  guided  by  interest, 
speedily  corrects.  The  bank  itself  is  in  so  much  jeopardy  of 
being  a  sufferer  by  it,  that  it  has  the  strongest  of  all  induce- 
ments to  be  on  its  guard.  It  may  not  only  be  injured  imme 
diately  by  the  delinquencies  of  the  persons  to  whom  such 
credit  is  given  ;  but  eventually,  by  the  incapacities  of  others, 
whom  their  impositions  or  failures  may  have  ruined. 

Nor  is  there  much  danger  of  a  bank's  being  betrayed  into 
this  error  from  want  of  information :  The  directors  them- 
selves being  for  the  most  part  selected  from  the  class  of  tra- 
ders, are  to  be  expected  to  possess  individually,  an  accurate 
knowledge  of  the  characters  and  situations  of  those  who 
come  within  that  description.  And  they  have,  in  addition  to 
this,  the  course  of  dealing  of  the  persons  themselves  with  the 
bank,  to  assist  their  judgment,  which  is  in  most  cases  a  good 
index  of  the  state  in  which  those  persons  are.  The  artifices 
and  shifts,  which  those  in  desperate  or  declining  circum- 
stances, are  obliged  to  employ  to  keep  up  the  countenance 
which  the  rules  of  the  bank  require,  and  the  train  of  their 
connections,  are  so  many  prognostics,  not  difficult  to  be  in- 
terpreted, of  the  fate  which  awaits  them.  Hence  it  not  un- 
frequently  happens,  that  banks  are  the  first  to  discover  the 
unsoundness  of  such  characters,  and  by  withholding  credit, 
to  announce  to  the  public  they  are  not  entitled  to  it. 

If  banks,  in  spite  of  every  precaution,  are  sometimes  be- 
trayed into  giving  a  false  credit  to  the  persons  described,  they 
more  frequently  enable  honest  and  industrious  men,  of  small, 
or  perhaps  of  no  capital,  to  undertake  and  prosecute  business. 


64 

with  advantage  to  themselves  and  to  the  community ;  and 
assist  merchants  of  both  capital  and  credit,  who  meet  with 
fortuitous  and  unforeseen  shocks,  which  might,  without  such 
helps,  prove  fatal  to  them  and  to  others,  to  make  head  against 
their  misfortunes,  and  finally  to  retrieve  their  affairs  ;  circum- 
stances which  form  no  inconsiderable  encomium  on  the  uti- 
lity of  banks. 

But  the  last,  and  heaviest  charge,  is  still  to  be  examined : 
this  is,  that  banks  tend  to  banish  the  gold  and  silver  out  of 
the  country. 

The  force  of  this  objection  rests  upon  their  being  an  engine 
of  paper  credit,  which  by  furnishing  a  substitute  for  the  me- 
tals, is  supposed  to  promote  their  exportation.  It  is  an  ob- 
jection which,  if  it  has  any  foundation,  lies  not  against  banks 
peculiarly,  but  against  every  species  of  paper  credit. 

The  most  common  answer  given  to  it  is,  that  the  thing 
supposed  is  of  little  or  no  consequence ;  that  it  is  immaterial 
what  serves  the  purpose  of  money ;  whether  paper,  or  gold 
and  silver ;  that  the  effect  of  both  upon  industry  is  the  same ; 
and  that  the  intrinsic  wealth  of  a  nation  is  to  be  measured, 
not  by  the  abundance  of  the  precious  metals  contained  in  it, 
but  by  the  quantity  of  the  productions  of  its  labor  and  in 
dustry. 

This  answer  is  not  destitute  of  solidity,  though  not  entirely 
satisfactory.  It  is  certain,  that  the  vivification  of  industry,  by 
a  full  circulation,  with  the  aid  of  a  proper  and  well  regulated 
paper  credit,  may  more  than  compensate  for  the  loss  of  a  part 
of  the  gold  and  silver  of  a  nation,  if  the  consequence  of  avoid- 
ing that  loss  should  be  a  scanty  or  defective  circulation. 

But  the  positive,  and  permanent  increase  or  decrease  of 
the  precious  metals  in  a  country,  can  hardly  ever  be  a  matter 
of  indifference.  As  the  commodity  taken  in  lieu  of  every 
other,  it  is  a  species  of  the  most  effective  wealth ;  and  as  the 
money  of  the  world,  it  is  of  great  concern  to  the  state  that  it 
possesses  a  sufficiency  of  it  to  face  any  demands  which  the 
protection  of  its  external  interests  may  create. 


HAMILTON'S  REPORT.  65 

The  objection  seems  to  admit  of  another  and  a  more  con- 
clusive answer,  which  controverts  the  fact  itself.  A  nation 
that  has  no  mines  of  its  own,  must  derive  the  precious  me- 
tals from  others ;  generally  speaking,  in  exchange  for  the 
products  of  its  labor  and  industry.  The  quantity  it  will  pos- 
sess will,  therefore,  in  the  ordinary  course  of  things,  be  regu- 
lated by  the  favorable  or  unfavorable  balance  of  its  trade  ; 
that  is,  by  the  proportion  between  its  abilities  to  supply  fo- 
reigners, and  its  wants  of  them  ;  between  the  amount  of  its 
exportations,  and  that  of  its  importations.  Hence  the  state  of 
its  agriculture  and  manufactures  ;  the  quantity  and  quality 
of  its  labor  and  industry  ;  must,  in  the  main,  influence  and 
determine  the  increase  or  decrease  of  its  gold  and  silver. 

If  this  be  true,  the  inference  seems  to  be,  that  well  consti- 
tuted banks  favor  the  increase  of  the  precious  metals.  It  has 
been  shown,  that  they  augment,  in  different  ways,  the  active 
capital  of  a  country.  This  it  is  which  generates  employ- 
ment ;  which  animates  and  expands  labor  and  industry. 
Every  addition  which  is  made  to  it,  by  contributing  to  put  in 
motion  a  greater  quantity  of  both,  tends  to  create  a  greater 
quantity  of  the  products  of  both.  And  by  furnishing  more 
materials  for  exportation,  conduces  to  a  favorable  balance  of 
trade,  and  consequently  to  the  introduction  and  increase  of 
gold  and  silver. 

This  conclusion  appears  to  be  drawn  from  solid  premises. 
There  are,  however,  objections  to  be  made  to  it. 

It  may  be  said,  that  as  bank  paper  affords  a  substitute  for 
specie,  it  serves  to  counteract  that  rigorous  necessity  for  the 
metals  as  a  medium  of  circulation,  which,  in  the  case  of  a 
wrong  balance,  might  restrain,  in  some  degree,  their  exporta- 
tion ;  and  it  may  be  added,  that  from  the  same  cause,  in  the- 
same  case,  it  would  retard  those  economical  and  parsimonious 
reforms  in  the  manner  of  living,  which  the  scarcity  of  money 
is  calculated  to  produce,  and  which  might  be  necessary  to  rec- 
tify such  wrong  balance. 

9 


66  HAMILTON'S  REPORT. 

There  is,  perhaps,  some  truth  in  both  these  observations  : 
but  they  appear  to  be  of  a  nature  rather  to  form  exceptions 
to  the  generality  of  the  conclusion,  than  to  overthrow  it.  The 
state  of  things  in  which  the  absolute  exigencies  of  circula- 
tion can  be  supposed  to  resist  with  any  effect  the  urgent  de- 
mands for  specie  which  a  wrong  balance  of  trade  may  occa- 
sion, presents  an  extreme  case.  And  a  situation  in  which 
a  too  expensive  manner  of  living  of  a  community,  compared 
with  its  means,  can  stand  in  need  of  a  corrective,  from  dis- 
tress or  necessity,  is  one  which  perhaps  rarely  results  but  from 
extraordinary  and  adventitious  causes  ;  such,  for  example,  as 
a  national  revolution,  which  unsettles  all  the  established  ha- 
bits of  a  people,  and  inflames  the  appetite  for  extravagance, 
by  the  illusions  of  an  ideal  wealth,  engendered  by  the  conti- 
nual multiplication  of  a  depreciating  currency,  or  some  simi- 
lar cause.  There  is  good  reason  to  believe,  that  where  the 
laws  are  wise  and  well  executed,  and  the  inviolability  of  pro- 
perty and  contracts  maintained,  the  economy  of  a  people 
will,  in  the  general  course  of  things,  correspond  with  its 
means. 

The  support  of  industry,  is  probably  in  every  case  of  more 
consequence  towards  correcting  a  wrong  balance  of  trade, 
than  any  practicable  retrenchments  in  the  expenses  of  fami- 
lies or  individuals  ;  and  the  stagnation  of  it  would  be  likely 
to  have  more  effect  in  prolonging,  than  any  such  savings  in 
shortening,  its  continuance.  That  stagnation  is  a  natural 
consequence  of  an  inadequate  medium,  which,  without  the 
aid  of  bank  circulation,  would,  in  the  cases  supposed,  be  se- 
verely felt. 

It  also  deserves  notice,  that  as  the  circulation  of  a  bank  is 
.always  in  a  compound  ratio  to  the  fund  upon  which  it  de- 
pends, and  to  the  demand  for  it  ;  and  as  that  fund  is  itself 
affected  by  the  exportation  of  the  metals,  there  is  no  danger 
of  its  being  overstocked,  as  in  the  case  of  paper  issued  at  the 
pleasure  of  the  government,  or  of  its  preventing  the  conse- 
quences of  any  unfavorable  balance  from  being  sufficiently 


67 

felt  to  produce  the  reforms  alluded  to,  as  far  as  circumstances 
may  require  and  admit. 

Nothing  can  be  more  fallible  than  the  comparisons  which 
have  been  made  between  different  countries,  to  illustrate  the 
truth  of  the  position  under  consideration.  The  comparative 
quantity  of  gold  and  silver  in  different  countries,  depends 
upon  an  infinite  variety  of  facts  and  combinations,  all  of 
which  ought  to  be  known,  in  order  to  judge  whether  the  ex- 
istence or  non-existence  of  paper  currencies,  has  any  share  in 
the  relative  proportions  they  contain.  The  mass  and  value 
of  the  productions  of  the  labor  and  industry  of  each,  com- 
pared with  its  wants  ;  the  nature  of  its  establishments  abroad; 
the  kind  of  wars  in  which  it  is  usually  engaged  ;  the  rela- 
tions it  bears  to  the  countries  which  are  the  original  possess- 
ors of  those  metals ;  the  privileges  it  enjoys  in  their  trade  ; 
these,  and  a  number  of  other  circumstances,  are  all  to  be 
taken  into  the  account,  and  render  the  investigation  too  com- 
plex to  justify  any  reliance  on  the  vague  and  general  sur- 
mises which  have  been  hitherto  hazarded  on  the  point. 

In  the  foregoing  discussion,  the  objection  has  been  consi- 
dered as  applying  to  the  permanent  expulsion  and  diminu- 
tion of  the  metals.  Their  temporary  exportation,  for  par- 
ticular purposes,  has  not  been  contemplated.  This,  it  must 
be  confessed,  is  facilitated  by  banks,  from  the  faculty  banks 
possess  of  supplying  their  place.  But  their  utility  is  in  no- 
thing more  conspicuous  than  in  these  very  cases.  They  ena- 
ble the  government  to  pay  its  foreign  debts,  and  to  answer 
any  exigencies  which  the  external  concerns  of  the  commu- 
nity may  have  produced.  They  enable  the  merchant  to  sup- 
port his  credit,  (on  which  the  prosperity  of  trade  depends,) 
when  special  circumstances  prevent  remittances  in  other 
modes.  They  enable  him  also  to  prosecute  enterprises,  which 
ultimately  tend  to  an  augmentation  of  the  species  of  wealth 
in  question.  It  is  evident,  thsrf  gold  and  silver  may  often  be 
employed  in  procuring  commodities  abroad ;  which,  in  a  cir- 
cuitous commerce,  replace  the  original  fund  with  considerable 


68  HAMILTON'S  REPORT. 

addition.  But  it  is  not  to  be  inferred  from  this  facility  given 
to  temporary  exportation,  that  banks,  which  are  so  friendly 
to  trade  and  industry,  are  in  their  general  tendency  inimical 
to  the  increase  of  the  precious  metals. 

These  several  views  of  the  subject,  appear  sufficient  to  im- 
press a  full  conviction  of  the  utility  of  banks,  and  to  demon- 
strate that  they  are  of  great  importance,  not  only  in  relation 
to  the  administration  of  the  finances,  but  in  the  general  sys- 
tem of  the  political  economy. 

The  judgment  of  many  concerning  them,  has,  no  doubt, 
been  perplexed  by  the  misinterpretation  of  appearances,  which 
were  to  be  ascribed  to  other  causes.  The  general  devasta- 
tion of  personal  property,  occasioned  by  the  late  war.  natu- 
rally produced  on  the  one  hand,  a  great  demand  for  money  ; 
and  on  the  other,  a  great  deficiency  of  it  to  answer  the  de- 
mand. Some  injudicious  laws,  which  grew  out  of  the  public 
distresses,  by  impairing  confidence,  and  causing  a  part  of  the 
inadequate  sum  in  the  country  to  be  locked  up,  aggravated 
the  evil ;  the  dissipated  habits  contracted  by  many  indivi- 
duals during  the  war,  which  after  the  peace  plunged  them 
into  expenses  beyond  their  incomes  ;  the  number  of  adven- 
turers without  capital,  and  in  many  instances  without  infor- 
mation, who  at  that  epoch  rushed  into  trade,  and  were  obliged 
to  make  any  sacrifices  to  support  a  transient  credit ;  the  em- 
ployment of  considerable  sums  in  speculations  upon  the  pub- 
lic debt,  which  from  its  unsettled  state  was  incapable  of  be- 
coming itself  a  substitute  :  all  these  circumstances  concur- 
ring, necessarily  led  to  usurious  borrowing ;  produced  most 
of  the  inconveniences,  and  were  the  true  cause  of  most  of  the 
appearances  which,  where  banks  were  established,  have  been 
by  some  erroneously  placed  to  their  account :  a  mistake 
which  they  might  easily  have  avoided,  by  turning  their  eyes 
towards  places  where  there  were  none ;  and  where,  never- 
theless, the  same  evils  woulc^Jiave  been  perceived  to  exist, 
even  in  a  greater  degree  than  where  those  institutions  had 
obtained. 


HAMILTONS  REPORT.  09 

These  evils  have  either  ceased,  or  been  greatly  mitigated. 
Their  more  complete  extinction  may  be  looked  for  from  that 
additional  security  to  property  which  the  constitution  of  the 
United  States  happily  gives  ;  (a  circumstance  of  prodigious 
moment  in  the  scale,  both  of  public  and  private  prosperity,) 
from  the  attraction  of  foreign  capital,  under  the  auspices  of 
that  security,  to  be  employed  upon  objects,  and  in  enterprises, 
for  which  the  state  of  this  country  opens  a  wide  .and  inviting 
field ;  from  the  consistency  and  stability  which  the  public 
debt  is  fast  acquiring,  as  well  in  the  public  opinion  at  home 
and  abroad,  as  in  fact ;  from  the  augmentation  of  capital 
which  that  circumstance  and  the  quarter  yearly  payment  of 
interest  will  afford ;  and  from  the  more  copious  circulation 
which  will  be  likely  to  be  created  by  a  well  constitutioned  na- 
tional bank. 

The  establishment  of  banks  in  this  country,  seems  to  be 
recommended  by  reasons  of  a  peculiar  nature.  Previously 
to  the  revolution,  circulation  was  in  a  great  measure  carried 
on  [by  paper  emitted  by  the  several  local  governments.  In 
Pennsylvania  alone,  the  quantity  of  it  was  near  a  million  and 
a  half  of  dollars.  This  auxiliary  may  be  said  to  be  now  at 
an  end.  And  it  is  generally  supposed,  that  there  has  been 
for  some  time  past  a  deficiency  of  circulating  medium.  How 
far  that  deficiency  is  to  be  considered  as  real  or  imaginary,  is 
not  susceptible  of  demonstration  :  but  there  are  circumstances 
and  appearances  which,  in  relation  to  the  country  at  large, 
countenance  the  supposition  of  its  reality. 

The  circumstances  are,  besides  the  fact  just  mentioned 
respecting  paper  emissions,  the  vast  tracts  of  waste  land,  and 
the  little  advanced  state  of  manufactures.  The  progressive 
settlement  of  the  former,  while  it  promises  ample  retribution, 
in  the  generation  of  future  resources,  diminishes  or  obstructs, 
in  the  mean  time,  the  active  wealth  of  the  country.  It  not 
only  draws  off  a  part  of  the  circulating  money,  and  places  it 
in  a  more  passive  state,  but  it  diverts  into  its  own  channels 
a  portion  of  that  species  of  labor  and  industry  which  would 


70  HAMILTON'S  REPORT. 

otherwise  be  employed  in  furnishing  materials  for  foreign 
trade  ;  and  which,  by  contributing  to  a  favorable  balance, 
would  assist  the  introduction  of  specie.  In  the  early  periods 
of  new  settlements,  the  settlers  not  only  furnish  no  surplus 
for  exportation,  but  they  consume  a  part  of  that  which  is  pro- 
duced by  the  labor  of  others.  The  same  thing  is  a  cause  that 
manufactures  do  not  advance,  or  advance  slowly.  And  not- 
withstanding some  hypotheses  to  the  contrary,  there  are 
many  things  to  induce  a  suspicion,  that  the  precious  metals 
will  not  abound  in  any  country  which  has  not  mines  or  va- 
riety of  manufactures.  They  have  been  sometimes  acquired 
by  the  sword  ;  but  the  modern  system  of  war  has  expelled 
this  resource ;  and  it  is  one  upon  which  it  is  to  be  hoped  the 
United  States  will  never  be  inclined  to  rely. 

The  appearances  alluded  to  are,  greater  prevalency  of  di- 
rect barter,  in  the  more  interior  districts  of  the  country,  which, 
however,  has  been  for  some  time  past  gradually  lessening  ; 
and  greater  difficulty  generally  in  the  advantageous  alienation 
of  improved  real  estate  ;  which  also  has  of  late  diminished, 
but  is  still  seriously  felt  in  different  parts  of  the  Union.  The 
difficulty  of  getting  money,  which  has  been  a  general  com- 
plaint, is  not  added  to  the  number  ;  because  it  is  the  com- 
plaint of  all  tunes,  and  one  in  which  imagination  must  ever 
have  too  great  scope  to  permit  an  appeal  to  it. 

If  the  supposition  of  such  a  deficiency  be  in  any  degree 
founded,  and  some  aid  to  circulation  be  desirable,  it  remains 
to  inquire  what  ought  to  be  the  nature  of  that  aid  ? 

The  emitting  of  paper  money  by  the  authority  of  govern- 
ment, is  wisely  prohibited  to  the  individual  states,  by  the  na- 
tional constitution  ;  and  the  spirit  of  that  prohibition  ought 
not  to  be  disregarded  by  the  government  of  the  United 
States.  Though  paper  emissions,  under  a  general  autho- 
rity, might  have  some  advantages  not  applicable,  and  be 
free  from  some  disadvantages  which  are  applicable,  to  the 
like  emissions  by  the  states  separately  ;  yet  they  are  of  a  na- 
ture so  liable  to  abuse,  and  it  may  even  be  affirmed,  so  cer- 


71 

tain  of  being  abused  ;  that  the  wisdom  of  the  government 
will  be  shown  in  never  trusting  itself  with  the  use  of  so  se- 
ducing and  dangerous  an  expedient.  In  times  of  tranquillity, 
it  might  have  no  ill  consequence  ;  it  might  even  perhaps  be 
managed  in  a  way  to  be  productive  of  good  ;  but  in  great 
and  trying  emergencies,  there  is  almost  a  moral  certainty  of 
its  becoming  mischievous.  The  stamping  of  paper  is  an  ope- 
ration so  much  easier  than  the  laying  of  taxes,  that  a  go- 
vernment, in  the  practice  of  paper  emissions,  would  rarely 
fail  in  any  such  emergency,  to  indulge  itself  too  far  in  the 
employment  of  that  resource,  to  avoid,  as  much  as  possible, 
one  less  auspicious  to  present  popularity.  If  it  should  not 
even  be  carried  so  far  as  to  be  rendered  an  absolute  bubble, 
it  would  at  least  be  likely  to  be  extended  to  a  degree,  which 
would  occasion  an  inflated  and  artificial  state  of  things,  in- 
compatible with  the  regular  and  prosperous  course  of  the  po- 
litical economy. 

Among  other  material  differences  between  a  paper  curren- 
cy, issued  by  the  mere  authority  of  government,  and  one 
issued  by  a  bank,  payable  in  coin,  is  this  :  that  in  the  first 
case,  there  is  no  standard  to  which  an  appeal  can  be  made, 
as  to  the  quantity  which  will  only  satisfy,  or  which  will  sur- 
charge the  circulation ;  in  the  last,  that  standard  results  from 
the  demand.  If  more  should  be  issued  than  is  necessary,  it 
will  return  upon  the  bank.  Its  emissions,  as  elsewhere  inti- 
mated, must  always  be  in  a  compound  ratio  to  the  fund  and 
the  demand  : — Whence  it  is  evident,  that  there  is  a  limitation 
in  the  nature  of  the  thing  ;  while  the  discretion  of  the  go- 
vernment is  the  only  measure  of  the  extent  of  emissions  by 
its  own  authority. 

This  consideration  further  illustrates  the  danger  of  emis- 
sions of  that  sort,  and  the  preference  which  is  due  to  bank 
paper. 

The  payment  of  the  interest  of  the  public  debt,  at  thirteen 
different  places,  is  a  weighty  reason,  peculiar  to  our  immedi- 
ate situation,  for  desiring  a  bank  circulation.  Without  a  pa- 


72 

per,  in  general  currency,  equivalent  to  gold  and  silver, 
a  considerable  proportion  of  the  specie  of  the  country  must 
always  be  suspended  from  circulation,  and  left  to  accu- 
mulate, preparatorily,  to  each  day  of  payment ;  and  as  often 
as  one  approaches,  there  must,  in  several  cases,  be  an  actual 
transportation  of  the  metals  at  both  expense  and  risk,  from 
their  natural  and  proper  reservoirs,  to  distant  places.  This 
necessity  will  be  felt  very  injuriously  to  the  trade  of  some  of 
the  states,  and  will  embarrass  not  a  little,  the  operations  of 
the  treasury  in  those  states.  It  will  also  obstruct  those  ne- 
gotiations, between  different  parts  of  the  Union,  by  the  in- 
strumentality of  treasury  bills,  which  have  already  afforded 
valuable  accommodations  to  trade  in  general. 

Assuming  it  then  as  a  consequence,  from  what  has  been 
said,  that  a  national  bank  is  a  desirable  institution,  two  in- 
quiries emerge — Is  there  no  such  institution,  already  in  be- 
ing, which  has  a  claim  to  that  character,  and  which  super- 
sedes the  propriety  or  necessity  of  another?  If  there  be 
none,  what  are  the  principles  upon  which  one  ought  to  be 
established  ? 

There  are  at  present  three  banks  in  the  United  States  : 
that  of  North  America,  established  in  the  city  of  Philadel- 
phia; that  of  New  York,  established  in  the  city  of  New 
York  ;  that  of  Massachusetts,  established  in  the  town  of 
Boston.  Of  these  three,  the  first  is  the  only  one  which  has 
at  any  time  had  a  direct  relation  to  the  government  of  the 
United  States. 

The  bank  of  North  America  originated  in  a  resolution  of 
congress  of  the  26th  of  May,  1781,  founded  upon  a  proposi- 
tion of  the  superintendant  of  finance,  which  was  afterwards 
carried  into  execution  by  an  ordinance  of  the  31st  of  De- 
cember following,  entitled  "  An  ordinance  to  incorporate  the 
subscribers  to  the  Bank  of  North  America/' 

The  aid  afforded  to  the  United  States  by  this  institution, 
during  the  remaining  period  of  the  war,  was  of  essential 
consequence  ;  and  its  conduct  towards  them  since  the  peace. 


HAMILTON'S  REPORT.  73 

has  not  weakened  its  title  to  their  patronage  and  favor.  So 
far  its  pretensions  to  the  character  in  question  are  respectable  ; 
but  there  are  circumstances  which  militate  against  them  ;  and 
considerations  which  indicate  the  propriety  of  an  establish- 
ment on  different  principles. 

The  directors  of  this  bank,  on  behalf  of  their  constitu- 
ents, have  since  accepted  and  acted  under  a  new  charter 
from  the  state  of  Pennsylvania,  materially  variant  from  their 
original  one  ;  and  which  so  narrows  the  foundation  of  the 
institution,  as  to  render  it  an  incompetent  basis  for  the  ex- 
tensive purposes  of  a  national  bank. 

The  limit  assigned  by  the  ordinance  of  congress  to  the 
stock  of  the  bank,  is  ten  millions  of  dollars.  The  last  char- 
ter of  Pennsylvania  confines  it  to  two  millions.  Questions 
naturally  arise,  whether  there  be  not  a  direct  repugnancy  be- 
tween two  charters  so  differently  circumstanced ;  and  whe- 
ther the  acceptance  of  the  one,  is  not  to  be  deemed  a  virtual 
surrender  of  the  other  ?  But  perhaps  it  is  neither  advisable 
nor  necessary,  to  attempt  a  solution  of  them. 

There  is  nothing  in  the  acts  of  congress,  which  imply  an 
exclusive  right  in  the  institution  to  which  they  relate,  except 
during  the  term  of  the  war.  There  is  therefore  nothing,  if 
the  public  good  require  it,  which  prevents  the  establishment 
of  another.  It  may,  however,  be  incidentally  remarked, 
that  in  the  general  opinion  of  the  citizens  of  the  United 
States,  the  bank  of  North  America  has  taken  the  station  of 
a  bank  of  Pennsylvania  only.  This  is  a  strong  argument 
for  a  new  institution,  or  for  a  renovation  of  the  old,  to  restore 
it  to  the  situation  in  which  it  originally  stood,  in  the  view  of 
the  United  States. 

But  though  the  ordinance  of  congress  contains  no  grant  of 
exclusive  privileges,  there  may  be  room  to  alledge,  that  the 
government  of  the  United  States  ought  not,  in  point  of  can- 
dor and  equity,  to  establish  any  rival  or  interfering  institu- 
tion, in  prejudice  of  the  one  already  established  ;  especially 

10 


74 

as  this  has,  from  services  rendered,  well  founded  claims  to  pro- 
tection and  regard. 

The  justice  of  such  an  observation  ought,  within  proper 
bounds,  to  be  admitted.  A  new  establishment  of  the  sort 
ought  not  to  be  made  without  cogent  and  sincere  reasons  of 
public  good.  And  in  the  manner  of  doing  it,  every  facility 
should  be  given  to  a  consolidation  of  the  old  with  the  new, 
upon  terms  not  injurious  to  the  parties  concerned.  But  there 
is  no  ground  to  maintain,  that  in  a  case  in  which  the  govern- 
ment has  made  no  condition  restricting  its  authority,  it  ought 
voluntarily  to  restrict  it,  through  regard  to  the  interests  of  a 
particular  institution,  when  those  of  the  state  dictate  a  differ- 
ent course ;  especially  too,  after  such  circumstances  have  in- 
tervened, as  characterize  the  actual  situation  of  the  bank  of 
North  America. 

j  The  inducements  to  a  new  disposition  of  the  thing  are 
now  to  be  considered.  The  first  of  them  which  occurs  is, 
the  at  least  ambiguous  situation  in  which  the  bank  of  North 
America  has  placed  itself,  by  the  acceptance  of  its  last  char- 
ter :  If  this  has  rendered  it  the  mere  bank  of  a  particular 
state,  liable  to  dissolution  at  the  expiration  of  fourteen  years, 
to  which  term  the  act  of  that  state  has  restricted  its  dura- 
tion ;  it  would  be  neither  fit  nor  expedient,  to  accept  it  as  an 
equivalent  for  a  bank  of  the  United  States. 
*  The  restriction  of  its  capital  also,  which,  according  to  the 
same  supposition,  cannot  be  extended  beyond  two  millions  of 
dollars,  is  a  conclusive  reason  for  a  different  establishment. 
So  small  a  capital  promises  neither  the  requisite  aid  to  govern- 
ment, nor  the  requisite  security  to  the  community.  It  may 
answer  very  well  the  purposes  of  local  accommodation,  but  is 
an  inadequate  foundation  for  a  circulation  coextensive  with 
the  United  States ;  embracing  the  whole  of  their  revenues, 
and  affecting  every  individual  into  whose  hands  the  paper 
may  come. 

And  inadequate  as  such  a  capital  would  be  to  the  essential 
ends  of  a  national  bank,  it  is  liable  to  be  rendered  still  more 


HAMILTON'S  REPORT.  75 

so,  by  that  principle  of  the  constitution  of  the  bank  of  North 
America,  contained  equally  in  its  old,  and  in  its  new  charter, 
which  leaves  the  increase  of  the  actual  capital  at  any  time, 
(now  far  short  of  the  allowed  extent,)  to  the  discretion  of  the 
directors  or  stockholders.  It  is  naturally  to  be  expected,  that 
the  allurements  of  an  advanced  price  of  stock,  and  of  large 
dividends,  may  disincline  those  who  are  interested,  to  an  ex- 
tension of  capital ;  from  which  they  will  be  apt  to  fear  a 
diminution  of  profits.  And  from  this  circumstance,  the  in- 
terest and  accommodation  of  the  public,  (as  well  indvidually 
as  collectively,)  are  made  more  subordinate  to  the  interest,  real 
or  imagined,  of  the  stockholders,  than  they  ought  to  be.  It  is 
true,  that  unless  the  latter  be  consulted,  there  can  be  no  bank 
(in  the  sense  at  least  in  which  institutions  of  this  kind,  worthy 
of  confidence,  can  be  established  in  this  country).  But  it 
does  not  follow,  that  this  is  alone  to  be  consulted,  or  that  it 
even  ought  to  be  paramount.  ^  Public  utility  is  more  truly 
the  object  of  public  banks,  than  private  profit.  And  it  is  the 
business  of  government,  to  constitute  them  on  such  principles, 
that  while  the  latter  will  result,  in  a  sufficient  degree,  to  afford 
competent  motives  to  engage  in  them,  the  former  be  not  made 
subservient  to  it.  To  effect  this,  a  principal  object  of  attention 
ought  to  be  to  give  free  scope  to  the  creation  of  an  ample  capi- 
tal ;  and  with  this  view,  fixing  the  bounds  which  are  deemed 
safe  and  convenient,  to  leave  no  discretion  either  to  stop  short 
of  them,  or  to  overpass  them.  The  want  of  this  precaution, 
in  the  establishment  of  the  bank  of  North  America,  is  a  fur- 
ther, and  an  important  reason,  for  desiring  one  differently 
constituted. 

v  There  may  be  room  at  first  sight,  for  a  supposition,  that  as 
the  profits  of  the  bank  will  bear  a  proportion  to  the  extent  of 
its  operations  ;  and  as,  for  this  reason,  the  interest  of  the  stock- 
holders will  not  be  disadvantageous^  affected  by  any  neces- 
sary augmentations  of  capital ;  there  is  no  cause  to  appre- 
hend that  they  will  be  indisposed  to  such  augmentations. 
But  most  men,  in  matters  of  this  nature,  prefer  the  cer- 


76  HAMILTON'S  REPORT, 

tainties  they  enjoy,  to  probabilities  depending  on  untried  ex- 
periments ;  especially  when  these  promise  rather  that  they 
will  not  be  injured,  than  that  they  will  be  benefited. 
^From  the  influence  of  this  principle,  and  a  desire  of  en- 
hancing its  profits,  the  directors  of  a  bank  will  be  more  apt  to 
overstrain  its  faculties,  in  an  attempt  to  face  the  additional  de- 
mands which  the  course  of  business  may  create,  than  to  set 
on  foot  new  subscriptions;  which  may  hazard  a  diminution  of 
the  profits,  and  even  a  temporary  reduction  of  the  price  of 
stock. 

Banks  are  among  the  best  expedients  for  lowering  the  rate 
of  interest  in  a  country  ;  but  to  have  this  effect,  their  capitals 
must  be  completely  equal  to  all  the  demands  of  business,  and 
such  as  will  tend  to  remove  the  idea,  that  the  accommoda- 
tions they  afford  are  in  any  degree  favors  ;  an  idea  very  apt 
to  accompany  the  parsimonious  dispensation  of  contracted 
funds.  In  this,  as  in  every  other  case,  the  plenty  of  the  com- 
modity ought  to  beget  a  moderation  of  the  price. 
*  The  want  of  a  principle  of  rotation,  in  the  constitution  of 
the  bank  of  North  America,  is  another  argument  for  a  varia- 
tion of  the  establishment.  Scarcely  one  of  the  reasons  which 
militate  against  this  principle  in  the  constitution  of  a  country, 
is  applicable  to  that  of  a  bank ;  while  there  are  strong  rea- 
sons in  favor  of  it,  in  relation  to  the  one,  which  do  not  apply  to 
the  other.  The  knowledge  to  be  derived  from  experience,  is 
the  only  circumstance  common  to  both,  which  pleads  against 
rotation  in  the  directing  officers  of  a  bank. 

But  the  objects  of  the  government  of  a  nation,  and  those 
of  the  government  of  a  bank,  are  so  widely  different,  as 
greatly  to  weaken  the  force  of  that  consideration,  in  refer- 
ence to  the  latter.  Almost  every  important  case  of  legisla- 
tion requires,  towards  a  right  decision,  a  general  and  accurate 
acquaintance  with  the  affairs  of  the  state ;  and  habits  of 
thinking,  seldom  acquired  but  from  a  familiarity  with  public 
concerns.  The  administration  of  a  bank,  on  the  contrary, 
is  regulated  by  a  few  simple  fixed  maxims,  the  application  of 


77 

which  is  not  difficult  to  any  man  of  judgment,  especially  if 
instructed  in  the  principles  of  trade.  It  is,  in  general,  a  con- 
stant succession  of  the  same  details. 

But  though  this  be  the  case,  the  idea  of  the  advantages  of 
experience  is  not  to  be  slighted  :  room  ought  to  be  left  for 
the  regular  transmission  of  official  information  ;  and  for  this 
purpose,  the  head  of  the  direction  ought  to  be  excepted  from 
the  principle  of  rotation.  With  this  exception,  and  with  the 
aid  of  the  information  of  the  subordinate  officers,  there  can 
be  no  danger  of  any  ill  effects  from  want  of  experience,  or 
knowledge ;  especially  as  the  periodical  exclusion  ought  not 
to  reach  the  whole  of  the  directors  at  one  time. 

v  The  argument  in  favor  of  the  principle  of  rotation  is  this  ; 
that  by  lessening  the  danger  of  combinations  among  the  di- 
rectors, to  make  the  institution  subservient  to  party  views,  or 
to  the  accommodation,  preferably,  of  any  particular  set  of 
men,  it  will  render  the  public  confidence  more  firm,  stable, 
and  unqualified. 

When  it  is  considered,  that  the  directors  of  a  bank 
are  not  elected  by  the  great  body  of  the  community,  in 
which  a  diversity  of  views  will  naturally  prevail,  at  dif- 
ferent conjunctures  ;  but  by  a  small  and  select  class  of  men, 
among  whom  it  is  far  more  easy  to  cultivate  a  steady  ad- 
herence to  the  same  persons  and  objects  ;  and  that  those  direc- 
tors have  it  in  their  power  so  immediately  to  conciliate,  by 
obliging  the  most  influential  of  this  class,  it  is  easy  to  per- 
ceive, that  without  the  principle  of  rotation,  changes  in  that 
body  can  rarely  happen,  but  as  a  concession  which  they  may 
themselves  think  it  expedient  to  make  to  public  opinion. 

^The  continual  administration  of  an  institution  of  this 
kind,  by  the  same  persons,  will  never  fail,  with  or  without 
cause,  from  their  conduct,  to  excite  distrust  and  discontent. 
The  necessary  secrecy  of  their  transactions,  gives  unlimited 
scope  to  imagination  to  infer  that  something  is,  or  may  be, 
wrong.  And  this  inevitable  mystery  is  a  solid  reason  for  in- 
serting inthe  constitution  of  a  bank  the  necessity  of  a  change 


78  HAMILTON'S  REPORT. 

of  men.  As  neither  the  mass  of  the  parties  interested,  nor 
the  public  in  general,  can  be  permitted  to  be  witnesses  of  the 
interior  management  of  the  directors,  it  is  reasonable  that 
both  should  have  that  check  upon  their  conduct,  and  that 
security  against  the  pre valency  of  a  partial  or  pernicious  sys- 
tem, which  will  be  produced  by  the  certainty  of  periodical 
changes.  "'Such  too  is  the  delicacy  of  the  credit  of  a  bank, 
that  every  thing  which  can  fortify  confidence  and  repel  sus- 
picion, without  injuring  its  operations,  ought  carefully  to  be 
sought  after  in  its  formation. 

A  further  consideration  in  favor  of  a  change,  is  the  im- 
proper rule,  by  which  the  right  of  voting  for  directors  is  regu- 
lated in  the  plan  upon  which  the  bank  of  North  America  was 
originally  constituted ;  namely,  a  vote  for  each  share,  and 
the  want  of  a  rule  in  the  last  charter ;  unless  the  silence 
of  it  on  that  point  may  signify  that  every  stockholder  is 
to  have  an  equal  and  a  single  vote,  which  would  be  a  rule  in 
a  different  extreme,  not  less  erroneous.  It  is  of  importance 
that  a  rule  should  be  established  on  this  head,  as  it  is  one  of 
those  things  which  ought  not  to  be  left  to  discretion  ;  and  it 
is  consequently  of  equal  importance,  that  the  rule  should  be 
a  proper  one. 

•^  A  vote  for  each  share,  renders  a  combination  between  a  few 
principal  stockholders,  to  monopolize  the  power  and  benefits 
of  the  bank,  too  easy.  An  equal  vote  to  each  stockholder, 
however  great  or  small  his  interest  in  the  institution,  allows 
not  that  degree  of  weight  to  large  stockholders,  which  it  is 
reasonable  they  should  have,  and  which  perhaps  their  secu- 
rity, and  that  of  the  bank,  require.  A  prudent  mean  is  to  be 
preferred.  A  conviction  of  this,  has  produced  a  by-law  of 
the  corporation  of  the  bank  of  North  America,  which  evi- 
dently aims  at  such  a  mean.  But  a  reflection  arises  here, 
that  a  like  majority  with  that  which  enacted  this  law,  may  at 
any  moment  repeal  it. 

'The  last  inducement  which  shall  be  mentioned,  is  the 
want  of  precautions  to  guard  against  a  foreign  influence  in- 
sinuating itself  into  the  direction  of  the  bank.  It  seems 


HAMILTON'S  REPORT.  79 

scarcely  reconcileable  with  a  due  caution,  to  permit,  that  any 
but  citizens  should  be  eligible,  as  directors  of  a  national  bank, 
or  that  non-resident  foreigners  should  be  able  to  influence  the 
appointment  of  directors,  by  the  votes  of  their  proxies.  In 
the  event,  however,  of  an  incorporation  of  the  bank  of  North 
America,  in  the  plan,  it  may  be  necessary  to  qualify  this  prin- 
ciple, so  as  to  leave  the  right  of  foreigners,  who  now  hold 
shares  of  its  stock,  unimpaired,  but  without  the  power  of 
transmitting  the  privileges  in  question  to  foreign  alienees. 

It  is  to  be  considered  that  such  a  bank  is  not  a  mere  mat- 
ter of  private  property,  but  a  political  machine  of  the  great- 
est importance  to  the  state. 

There  are  other  variations  from  the  constitution  of  the 
bank  of  North  America,  not  of  inconsiderable  moment,  which 
appear  desirable,  but  which  are  not  of  magnitude  enough  to 
claim  a  preliminary  discussion  :  These  will  be  seen  in  the 
plan  which  will  be  submitted  in  the  sequel. 

If  the  objections  which  have  been  stated  to  the  constitution 
of  the  bank  of  North  America,  are  admitted  to  be  well  founded, 
they  will  nevertheless  not  derogate  from  the  merit  of  the 
main  design,  or  of  the  services  which  that  bank  has  rendered, 
or  of  the  benefits  which  it  has  produced.  The  creation  of 
such  an  institution,  at  the  time  it  took  place,  was  a  measure 
dictated  by  wisdom.  Its  utility  has  been  amply  evinced  by 
its  fruits — American  independence  owes  much  to  it. — And  it 
is  very  conceivable,  that  reasons  of  the  moment,  may  have 
rendered  those  features  in  it  inexpedient,  which  a  revision 
with  a  permanent  view,  suggests  as  desirable. 

The  order  of  the  subject,  leads  next  to  an  inquiry  into  the 
principles  upon  which  a  national  bank  ought  to  be  or- 
ganized. 

The  situation  of  the  United  States  naturally  inspires  a 
wish  that  the  form  of  the  institution  cofild  admit  of  a  plu- 
rality of  branches.  But  various  considerations  discourage 
from  pursuing  this  idea.  The  complexity  of  such  a  plan 
would  be  apt  to  inspire  doubts,  which  might  deter  from  ad- 


80 

venturing  in  it :  And  the  practicability  of  a  safe  and  orderly 
administration,  though  not  to  be  abandoned  as  desperate, 
cannot  be  so  manifest  in  perspective,  as  to  promise  the  remo- 
val of  those  doubts,  or  to  justify  the  government  in  adopting 
the  idea  as  an  original  experiment.  The  most  that  would 
seem  advisable,  on  this  point,  is  to  insert  a  provision,  which 
may  lead  to  it  hereafter,  if  experience  shall  more  clearly  de- 
monstrate its  utility,  and  satisfy  those  who  may  have  the  di- 
rection, that  it  may  be  adopted  with  safety.  It  is  certain,  that 
it  would  have  some  advantages,  both  peculiar  and  important. 
Besides  more  general  accommodation,  it  would  lessen  the 
danger  of  a  run  upon  the  bank. 

The  argument  against  it  is,  that  each  branch  must  be  un- 
der a  distinct,  though  subordinate  direction,  to  which  a  consi- 
derable latitude  of  discretion  must  of  necessity  be  intrusted. 
And  as  the  property  of  the  whole  institution  would  be  liable 
for  the  engagements  of  each  part ;  that,  and  its  credit,  would 
be  at  stake  upon  the  prudence  of  the  directors  of  every  part. 
The  mismanagement  of  either  branch  might  hazard  serious 
disorder  in  the  whole. 

Another  wish,  dictated  by  the  particular  situation  of  the 
country,  is,  that  the  bank  could  be  so  constituted  as  to  be 
made  an  immediate  instrument  of  loans  to  the  proprietors  of 
land ;  but  this  wish  also  yields  to  the  difficulty  of  accom- 
plishing it.  Land  is  alone  an  unfit  fund  for  a  bank  circula- 
tion :  If  the  notes  issued  upon  it  were  not  to  be  payable  in 
coin,  on  demand,  or  at  a  short  date,  this  would  amount  to 
nothing  more  than  a  repetition  of  the  paper  emissions,  which 
are  now  exploded  by  the  general  voice.  If  the  notes  are  to 
be  payable  in  coin,  the  land  must  first  be  converted  into  it, 
by  sale  or  mortgage.  The  difficulty  of  effecting  the  latter, 
is  the  very  thing  which  begets  the  desire  of  finding  another 
resource  ;  and  the  former  would  not  be  practicable  on  a  sud- 
den emergency,  but  with  sacrifices  which  would  make  the 
cure  worse  than  the  disease.  Neither  is  the  idea  of  consti- 
tuting the  fund  partly  of  coin  and  partly  of  land,  free  from 


HAMILTON'S  REPORT.  81 

impediments  :  these  two  species  of  property  do  not,  lor  the 
most  part,  unite  in  the  same  hands.  Will  tiie  moneyed  man 
consent  to  enter  into  a  partnership  with  the  landholder,  by 
which  the  latter  will  share  in  the  profits  which  will  be  made 
by  the  money  of  the  former  ?  The  money,  it  is  evident, 
will  be  the  agent  or  efficient  cause  of  the  profits — the  land 
can  only  be  regarded  as  a  additional  security.  It  is  not  dif- 
ficult to  foresee,  that  a  union  on  such  terms,  will  not  readily 
be  formed.  If  the  landholders  are  to  procure  the  money  by 
sale  or  mortgage  of  a  part  of  their  lands,  this  they  can  as 
well  do,  when  the  stock  consists  wholly  of  money,  as  if  it 
were  to  be  compounded  of  money  and  land. 

To  procure  for  the  landholders  the  assistance  of  loans  is  the 
great  desideratum.  Supposing  other  difficulties  surmounted, 
and  a  fund  created,  composed  partly  of  coin  and  partly  of 
land,  yet  the  benefit  contemplated  could  only  then  be  ob- 
tained, by  the  bank's  advancing  them  its  notes  for  the  whole, 
or  part  of  the  value  of  the  lands  they  had  subscribed  to  the 
stock.  If  this  advance  was  small,  the  relief  aimed  at  would 
not  be  given  ;  if  it  was  large,  the  quantity  of  notes  issued 
would  be  a  cause  of  distrust,  and,  if  received  at  all,  they 
would  be  likely  to  return  speedily  upon  the  bank  for  pay- 
ment ;  which,  after  exhausting  its  coin,  might  be  under  the 
necessity  of  turning  its  lands  into  money,  at  any  price  that 
could  be  obtained  for  them,  to  the  irreparable  prejudice  of  the 
proprietors. 

Considerations  of  public  advantage  suggest  a  further  wish, 
which  is,  that  the  bank  could  be  established  upon  principles 
that  would  cause  the  profits  of  it  to  redound  to  the  immediate 
benefit  of  the  state.  This  is  contemplated  by  many  who 
speak  of  a  national  bank,  but  the  idea  seems  liable  to  insu- 
perable objections.  To  attach  full  confidence  to  an  institu- 
tion of  this  nature,  it  appears  to  be  an  essential  ingredient  in 
its  structure,  that  it  shall  be  under  a  private,  not  a  jmblic  di- 
rection, under  the  guidance  of  individual  interest,  not  of 
public  policy  ;  which  would  be  supposed  to  be.  and  in  cer- 

11 


HAMILTON'S  REPORT. 

tain  emergencies,  under  a  feeble  or  too  sanguine  administra- 
tion, would  really  be,  liable  to  being  too  much  influenced  by 
public  necessity.  The  suspicion  of  this,  would  most  pro- 
bably be  a  canker  that  would  continually  corrode  the  vitals  of 
the  credit  of  the  bank,  and  would  be  most  likely  to  prove 
fatal  in  those  situations  in  which  the  public  good  would  re- 
quire that  they  should  be  most  sound  and  vigorous.  It  would, 
indeed,  be  little  less  than  a  miracle,  should  the  credit  of  the 
bank  be  at  the  disposal  of  the  government,  if,  in  a  long  series 
of  time,  there  was  not  experienced  a  calamitous  abuse  of  it. 
It  is  true,  that  it  would  be  the  real  interest  of  the  government 
not  to  abuse  it ;  its  genuine  policy  to  husband  and  cherish  it 
with  the  most  guarded  circumspection,  as  an  inestimable  trea- 
sure. But  what  government  ever  uniformly  consulted  its  true 
interests,  in  opposition  to  the  temptations  of  momentary  ex- 
igencies ?  What  nation  was  ever  blessed  with  a  constant 
succession  of  upright  and  wise  administrators  ? 

The  keen,  steady,  and  as  it  were  magnetic  sense  of  their 
own  interest  as  proprietors,  in  the  directors  of  a  bank,  point- 
ing invariable  to  its  true  pole,  the  prosperity  of  the  institu- 
tion, is  the  only  security  that  can  always  be  relied  upon  for 
a  carefwl  and  prudent  administration.  It  is,  therefore,  the 
only  basis  on  which  an  enlightened,  unqualified,  and  perma- 
nent confidence,  can  be  expected  to  be  erected  and  main- 
tained. 

The  precedents  of  the  banks  established  in  several  cities 
of  Europe :  Amsterdam,  Hamburg,  and  others  ;  may  seem 
to  militate  against  this  position.  Without  a  precise  know- 
ledge of  all  the  peculiarities  of  their  respective  constitutions, 
it  is  difficult  to  pronounce  how  far  this  may  be  the  case. 
That  of  Amsterdam,  however,  which  we  best  know,  is 
rather  under  a  municipal  than  a  governmental  direction.  Par- 
ticular magistrates  of  the  city,  not  officers  of  the  republic, 
have  the  management  of  it.  It  is  also  a  bank  of  deposit,  not 
of  loan,  or  circulation  ;  consequently,  less  liable  to  abuse,  as 
well  as  less  useful.  Its  general  business  consists  in  receiving 


S3 

money  for  safe  keeping,  which  if  not  called  for  within  a  cer- 
tain time,  becomes  a  part  of  its  stock,  and  irreclaimable: 
But  a  credit  is  given  for  it  on  the  books  of  the  bank,  which, 
being  transferable,  answers  all  the  purposes  of  money. 

The  directors  being  magistrates  of  the  city,  and  the  stock- 
holders, in  general,  its  most  influential  citizens ;  it  is  evident, 
that  the  principle  of  private  interest  must  be  prevalent  in  the 
management  of  the  bank.  And  it  is  equally  evident,  that  from 
the  nature  of  its  operations,  that  principle  is  less  essential  to 
it,  than  to  an  institution  constituted  with  a  view  to  the  accom- 
modation of  the  public  and  individuals,  by  direct  loans  and 
a  paper  circulation. 

As  far  as  may  concern  the  aid  of  the  bank,  within  the  pro- 
per limits,  a  good  government  has  nothing  more  to  wish  for, 
than  it  will  always  possess  ;  though  the  management  be  in 
the  hands  of  private  individuals.  As  the  institution,  if  rightly 
constituted,  must  depend  for  its  renovation  from  time  to 
time  on  the  pleasure  of  the  government,  it  will  not  be  likely 
to  feel  a  disposition  to  render  itself  by  its  conduct,  unworthy 
of  public  patronage.  The  government  too,  in  the  adminis- 
tration of  its  finances,  has  it  in  its  power  to  reciprocate  bene- 
fits to  the  bank,  of  not  less  importance  than  those  which  the 
bank  affords  to  the  government,  and  which,  besides,  are 
never  unattended  with  an  immediate  and  adequate  compen- 
sation. Independent  of  these  more  particular  considerations, 
the  natural  weight  and  influence  of  a  good  government  will 
always  go  far  towards  procuring  a  compliance  with  its  de- 
sires ;  and  as  the  directors  will  usually  be  composed  of  some 
of  the  most  discreet,  respectable,  and  well-informed  citizens, 
it  can  hardly  ever  be  difficult  to  make  them  sensible  of  the 
force  of  the  inducements  which  ought  to  stimulate  their  ex- 
ertions. 

It  will  not  follow,  from  what  has  been  said,  that  the  stato 
may  not  be  the  holder  of  a  part  of  the  stock  of  a  bank,  and 
consequently  a  sharer  in  the  profits  of  it.  It  will  only  follow, 
that  it  ought  not  to  desire  any  participation  in  the  direction 


84  HAMILTON'S  REPORT. 

of  it,  and  therefore  ought  not  to  own  the  whole  or  a  principal 
part  of  the  stock  ;  for  if  the  mass  of  the  property  should  be- 
long to  the  public,  and  if  the  direction  of  it  should  be  in  pri- 
vate hands,  this  would  be  to  commit  the  interests  of  the  state 
to  persons  not  interested,  or  not  enough  interested  in  their 
proper  management. 

There  is  one  thing,  however,  which  the  government  owes 
to  itself  and  the  community  ;  at  least  to  all  that  part  of  it  who 
are  not  stockholders  ;  which  is  to  reserve  to  itself  a  right  of 
ascertaining,  as  often  as  may  be  necessary,  the  state  of  the 
bank,  excluding,  however,  all  pretension  to  control.  This 
right  forms  an  article  in  the  primitive  constitution  of  the 
bank  of  North  America,  and  its  propriety  stands  upon  the 
clearest  reasons.  If  the  paper  of  a  bank  is  to  be  permitted  to 
insinuate  itself  into  ah1  the  revenues  and  receipts  of  a  country ; 
if  it  is  even  to  be  tolerated  as  the  substitute  for  gold  and  sil- 
ver, in  all  the  transactions  of  business ;  it  becomes,  in  either 
view,  a  national  concern  of  the  first  magnitude.  As  such, 
the  ordinary  rules  of  prudence  require  that  the  government 
should  possess  the  means  of  ascertaining,  whenever  it  thinks 
fit,  that  so  delicate  a  trust  is  executed  with  fidelity  and  care. 
A  right  of  this  nature  is  not  only  desirable  as  it  respects  the 
government,  but  it  ought  to  be  equally  so  to  all  those  con- 
cerned in  the  institution,  as  an  additional  title  to  public  and 
private  confidence,  and  as  a  thing  which  can  only  be  formi- 
dable to  practices  that  imply  mismanagement.  The  pre- 
sumption must  always  be,  that  the  characters  who  would  be 
intrusted  with  the  exercise  of  this  right  on  behalf  of  the  go- 
vernment, will  not  be  deficient  in  the  discretion  which  it  may 
require  ;  at  least  the  admitting  of  this  presumption  cannot  be 
deemed  too  great  a  return  of  confidence  for  that  very  large 
portion  of  it  which  the  government  is  required  to  place  in  the 
bank. 

Abandoning,  therefore,  ideas  which  however  agreeable  or 
desirable,  are  neither  practicable  nor  safe,  the  following  plan 


HAMILTON'S  REPORT.  S5 

lor  the  constitution  of  a  national  bank,  is  respectfully  sub- 
mitted to  the  consideration  of  the  house. 

I.  The  capital  stock  of  the  bank  shall  not  exceed  ten  mil- 
lions of  dollars,  divided  into  twenty-five  thousand  shares,  each 
share  being'  four  hundred  dollars  ;  to  raise  which  sum,  sub- 
scriptions shall  be  opened  on  the  first  Monday  of  April  next, 
and  shall  continue  open  until  the  whole  shall  be  subscribed. 
Bodies  politic,  as  well  as  individuals,  may  subscribe. 

I 1 .  The  amount  of  each  share  shall  be  payable,  one  fourth 
in  gold  and  silver  coin,  and  three  fourths  in  that  part  of  the 
public  debt,  which,  according  to  the  loan  proposed  by  the  act 
making  provision  for  the  debt  of  the  United  States,  shall  bear 
an  accruing  interest  at  the  time  of  payment  of  six  per  centum 
per  annum. 

III.  The  respective  sums  subscribed,  shall  be  payable  in 
four  equal  parts,  as  well  specie  as  debt,  in  succession,  and  at 
the  distance  of  six  calendar  months  from  each  other ;  the 
first  payment  to  be  made  at  the  time  of  subscription.     If 
there  shall  be  a  failure  in  any  subsequent  payment,  the  party 
failing  shall  lose  the  benefit  of  any  dividend  which  may  have 
accrued  prior  to  the  time  for  making  such  payment,  and 
during  the  delay  of  the  same. 

IV.  The  subscribers  to  the  bank,  and  their  successors, 
shall  be  incorporated,  and  shall  so  continue,  until  the  final 
redemption  of  that  part  of  its  stock  which  shall  consist  of  the 
public  debt. 

V.  The  capacity  of  the  corporation  to  hold  real  and  per- 
sonal estate,  shall  be  limited  to  fifteen  millions  of  dollars,  in- 
cluding the  amount  of  its  capital  or  original  stock.     The 
lands  and  tenements  which  it  shall  be  permitted  to  hold,  shall 
be  only  such  as  shall  be  requisite  for  the  immediate  accom- 
modation of  the  institution  ;  and  such  as  shall  have  been  bona 
fide  mortgaged  to  it  by  way  of  security,  or  conveyed  to  it  in 
satisfaction  of  debts  previously  contracted,  in  the  usual  course 
of  its  dealings,  or  purchased  at  sales  upon  judgments  which 
shall  have  been  obtained  for  such  debts. 


86  HAMILTON'S  REPORT. 

VI.  The  totality  of  the  debts  of  the  company,  whether  by 
bond,  bill,  note,  or  other  contract,  (credits  for  deposits  except- 
ed,)  shall  never  exceed  the  amount  of  its  capital  stock.     In 
case  of  excess,  the  directors  under  whose  administration  it 
shall  happen,  shall  be  liable  for  it  in  their  private  or  separate 
capacities.     Those  who  may    have  dissented,  may  excuse 
themselves  from  this  responsibility,  by  immediately  giving  no- 
tice of  the  fact  and  their  dissent,  to  the  president  of  the  United 
States,  and  to  the  stockholders,  at  a  general  meeting  to  be 
called  by  the  president  of  the  bank,  at  their  request. 

VII.  The  company  may  sell  or  demise  its  lands  and  tene- 
ments or  may  sell  the  whole  or  any  part  of  the  public  debt, 
whereof  its  stock  shall  consist ;  but  shall  trade  in  nothing 
except  bills  of  exchange,  gold  and  silver  bullion,  or  in  the  sale 
of  goods  pledged  for  money  lent ;  nor  shall  take  more  than 
at  the  rate  of  six  per  centum  per  annum,  upon  its  loans  or 
discounts. 

VIII.  No  loan  shall  be  made  by  the  bank,  for  the  use  or 
on  account  of  the  government  of  the  United  States,  or  of  either 
of  them,  to  an  amount  exceeding  fifty  thousand  dollars,  or  of 
any  foreign  prince  or  state,  unless  previously  authorized  by  a 
law  of  the  United  States. 

IX.  The  stock  of  the  bank  shall  be  transferrable  according 
to  such  rules  as  shall  be  instituted  by  the  company  in  that 
behalf. 

X.  The  affairs  of  the  bank  shall  be  under  the  manage- 
ment of  twenty-five  directors,  one  of  whom  shall  be  the  pre- 
sident.    And  there  shall  be  on  the  first  Monday  of  January, 
in  each  year,  a  choice  of  directors,  by  a  plurality  of  suffrages 
of  the  stockholders,  to  serve  for  a  year.     The  directors,  at 
their  first  meeting  after  each  election,  shall  choose  one  of  their 
number  as  president. 

XI.  The  number  of  votes  to  which  each  stockholder  shall 
be  entitled,  shall  be  according  to  the  number  of  shares  he 
shall  hold,  in  the  proportions  following :  that  is  to  say,  for 
one  share,  and  not  more  than  two  shares,  one  vote ;  for 


HAMILTON'S  REPORT.  87 

every  two  shares,  above  two,  and  not  exceeding  ten,  one  vote : 
for  every  four  shares  above  ten,  and  not  exceeding  thirty,  one 
vote  ;  for  every  six  shares  above  thirty,  and  not  exceeding 
sixty,  one  vote  ;  for  every  eight  shares  above  sixty,  and  not 
exceeding  one  hundred,  one  vote  ;  and  for  every  ten  shares 
above  one  hundred,  one  vote  :  but  no  person,  copartnership, 
or  body  politic,  shall  be  entitled  to  a  greater  number  than 
thirty  votes.  And  after  the  first  election,  no  share  or  shares 
shall  confer  a  right  of  suffrage,  which  shall  not  have  been 
holden  three  calendar  months  previous  to  the  day  of  election. 
Stockholders  actually  resident  within  the  United  States,  and 
none  other,  may  vote  inflections  by  proxy. 

XII.  Not  more  than  three  fourths  of  the  directors  in  office, 
exclusive  of  the  president,  shall  be  eligible  for  the  next  suc- 
ceeding year.     But  the  director  who  shall  be  president  at  the 
time  of  an  election,  may  be  always  re-elected. 

XIII.  None  but  a  stockholder,  being  a  citizen  of  the  United 
States,  shall  be  eligible  as  a  director. 

XIV.  Any  number  of  stockholders  not  less  than  sixty,  who 
together  shall  be  proprietors  of  two  hundred  shares,  or  up- 
wards, shall  have  power  at  any  time  to  call  a  general  meet- 
ing of  the  stockholders,  for  purposes  relative  to  the  institution ; 
giving  at  least  six  weeks'  notice,  in  two  public  gazettes  of  the 
place  where  the  bank  is  kept,  and  specifying,  in  such  notice, 
the  object  of  the  meeting. 

XV.  In  case  of  the  death,  resignation,  absence  from  the 
United  States,  or  removal  of  a  director  by  the  stockholders, 
his  place  may  be  filled  by  a  new  choice  for  the  remainder  of 
the  year. 

XVI.  No  director  shall  be  entitled  to  any  emolument,  un- 
less the  same  shall  have  been  allowed  by  the  stockholders,  at 
a  general  meeting.     The  stockholders  shall  make  such  com- 
pensation to  the  president,  for  his  extraordinary  attendance 
at  the  bank,  as  shall  appear  to  them  reasonable. 

XVII.  Not  less  than  seven  directors  shall  constitute  a 
board  for  the  transaction  of  business. 


88 

XVIII.  Every  cashier,  or  treasurer,  before  he  enters  on  the 
duties  of  his  office,  shall  be  required  to  give  bond,  with  two 
or  more  sureties,  to  the  satisfaction  of  the  directors,  in  a  sum 
not  less  than  twenty  thousand  dollars,  with  condition  for  his 
good  behaviour. 

XIX.  Half  yearly  dividends  shall  be  made  of  so  much  of 
the  profits  of  the  bank,  as  shall  appear  to  the  directors  ad- 
visable.     And  once  in  every  three  years  the  directors  shall 
lay  before  the  stockholders,  at  a  general  meeting,  for  their  in- 
formation, an  exact  and  particular  statement  of  the  debts 
which  shall  have  remained  unpaid,  after  the  expiration  of  the 
original  credit,  for  a  period  of  treble  the  term  of  that  credit, 
and  of  the  surplus  of  profit,  if  any,  after  deducting  losses 
and  dividends. 

XX.  The  bills  and  notes  of  the  bank  originally  made  pay- 
able, or  which  shall  have  become   payable  on  demand,  in 
gold  and  silver  coin,  shall  be  receivable  in  all  payments  to  the 
United  States. 

XXL  The  officer  at  the  head  of  the  treasury  department 
of  the  United  States,  shall  be  furnished  from  time  to  time, 
as  often  as  he  may  require,  not  exceeding  once  a  week,  with 
statements  of  the  amount  of  the  capital  stock  of  the  bank, 
and  of  the  debts  due  to  the  same,  of  the  moneys  deposited 
therein,  of  the  notes  in  circulation,  and  of  the  cash  in  hand; 
and  shall  have  a  right  to  inspect  such  general  accounts  in 
the  books  of  the  bank,  as  shall  relate  to  the  said  statements ; 
provided  that  this  shall  not  be  construed  to  imply  a  right  of 
inspecting  the  account  of  any  private  individual  or  individu- 
als, with  the  bank. 

XXII.  No  similar  institution  shall  be  established  by  any 
future  act  of  the  United  States,  dining  the  continuance  of  the 
one  hereby  proposed  to  be  established. 

XXIII.  It  shall  be  lawful  for  the  directors  of  the  bank  to 
establish  offices,  wheresoever  they  shall  think  fit,  within  the 
United  States,  for  the  purpose  of  discount  and  deposit  only, 
and  upon  the  same  terms,  and  in  the  same  manner,  as  shall 


HAMILTON ;S  KEPUlti.  89 

be  practised  at  the  bank,  and  to  commit  the  management  of 
the  said  offices,  and  the  making  of  the  said  discounts,  either 
to  agents  specially  appointed  by  them,  or  to  such  persons  as 
may  be  chosen  by  the  stockholders  residing  at  the  place  where 
any  such  office  shall  be,  under  such  agreements,  and  subject 
to  such  regulations  as  they  shall  deem  proper ;  not  being 
contrary  to  law,  or  to  the  constitution  of  the  bank. 

XXIV.  And  lastly— The  president  of  the  United  States 
shall  be  authorized  to  cause  a  subscription  to  be  made  to  the 
stock  of  the  said  company,  on  behalf  of  the  United  States, 
to  an  amount  not  exceeding  two  millions  of  dollars,  to  be 
paid  out  of  the  moneys  which  shall  be  borrowed  by  virtue  of 
either  of  the  acts,  the  one  entitled  "  An  act  making  provi- 
sion for  the  debt  of  the  United  States,"  and  the  other  entitled 
;:  An  act  making  provision  for  the  reduction  of  the  public 
debt,"  borrowing  of  the  bank  an  equal  sum,  to  be  applied  to 
the  purposes  for  which  the  said  moneys  shall  have  been  pro- 
cured, reimbursable  in  ten  years  by  equal  annual  instal- 
ments ;  or  at  any  time  sooner,  or  in  any  greater  proportions, 
that  the  government  may  think  fit. 

The  reasons  for  the  several  provisions  contained  in  the 
foregoing  plan,  have  been  so  far  anticipated,  and  will,  for  the 
most  part,  be  so  readily  suggested  by  the  nature  of  those  pro- 
visions, that  any  comments  which  need  further  be  made,  will 
be  both  few  and  concise. 

The  combination  of  a  portion  of  the  public  debt,  in  the 
formation  of  the  capital,  is  the  principal  thing  of  which  ail 
explanation  is  requisite.  The  chief  object  of  this  is,  to  en- 
able the  creation  of  a  capital  sufficiently  large  to  be  the  basis 
of  an  extensive  circulation,  and  an  adequate  security  for  it, 
As  has  been  elsewh  ere  remarked,  the  original  plan  of  the 
bank  of  North  America,  contemplated  a  capital  of  ten  mil 
lions  of  dollars,  which  is  certainly  not  too  broad  a  foundation 
for  the  extensive  operations  to  which  a  national  bank  is  des- 
tined. But  to  collect  such  a  sum  in  this  country  in  gold  and 
silver,  into  one  depository,  may,  without  hesitation,  be  pre- 
12 


90  HAMILTON'S  REPORT, 

nounced  impracticable.  Hence  the  necessity  oi'  an  auxiliary  > 
which  the  public  debt  at  once  presents. 

This  part  of  the  fund  will  be  always  ready  to  come  in  aid 
of  the  specie.  It  will  more  and  more  command  a  ready  sale  : 
and  can  therefore  expeditiously  be  turned  into  coin,  if  an  ex- 
igency of  the  bank  should  at  any  time  require  it.  This  quali- 
ty of  prompt  convertibility  into  coin,  renders  it  an  equivalent 
for  that  necessary  agent  of  bank  circulation;  and  distin- 
guishes it  from  a  fund  in  land,  of  which  the  sale  would  gene- 
rally be  far  less  compendious,  and  at  great  disadvantage. 
The  quarter-yearly  receipts  of  interest,  will  also  be  an  actual 
addition  to  the  specie  fund,  during  the  intervals  between  them 
and  the  half-yearly  dividends  of  profits.  The  objection  to 
combining  land  with  specie,  resulting  from  their  not  being 
generally  in  possession  of  the  same  persons,  does  not  apply 
to  the  debt,  which  will  always  be  found  in  considerable  quan- 
tity among  the  moneyed  and  trading  people. 

The  debt  composing  part  of  the  capital,  besides  its  collate- 
ral effect  in  enabling  the  bank  to  extend  its  operations,  and 
consequently  to  enlarge  its  profits,  will  produce  a  direct  an- 
nual revenue  of  six  per  centum  from  the  government,  which 
will  enter  into  the  half-yearly  dividends  received  by  the 
stockholders. 

When  the  present  price  of  the  public  debt  is  considered, 
and  the  effect  which  its  conversion  into  bank  stock,  incorpo- 
rated with  a  specie  fund,  would,  in  all  probability,  have  to 
accelerate  its  rise  to  the  proper  point,  it  will  easily  be  disco- 
vered, that  the  operation  presents  in  its  outset  a  very  considera- 
ble advantage  to  those  who  may  become  subscribers;  and  from 
the  influence  which  that  rise  would  have  on  the  general  mass 
of  the  debt,  a  proportional  benefit  to  all  the  public  creditors, 
and  in  a  sense  which  has  been  more  than  once  adverted  to,  to 
the  community  at  large. 

There  is  an  important  fact,  which  exemplifies  the  fitness 
of  the  public  debt,  for  a  bank  fund,  and  which  may  serve  to 
remove  doubts  in  some  minds  on  this  point.  It  is  this,  tha 


HAMILTON'S  REPORT.  'Ji 

the  bank  of  England,  on  its  first  erection,  rested  wholly  on 
that  foundation.  The  subscribers  to  a  loan  to  government  of 
one  million  two  hundred  thousand  pounds  sterling,  were  in- 
corporated as  a  bank  ;  of  which  the  debt  created  by  the  loan 
and  the  interest  upon  it,  were  the  sole  fund.  The  subsequent 
augmentations  of  its  capital,  which  now  amounts  to  between 
eleven  and  twelve  millions  of  pounds  sterling,  have  been  of 
the  same  nature. 

The  confining  of  the  right  of  the  bank  to  contract  debts 
to  the  amount  of  its  capital,  is  an  important  precaution, 
which  is  not  to  be  found  in  the  constitution  of  the  bank  of 
North  America,  and  which,  while  the  fund  consists  wholly  of 
coin,  would  be  a  restriction  attended  with  inconveniencies,  but 
would  be  free  from  any,  if  the  composition  of  it  should  be 
such  as  is  now  proposed.  The  restriction  exists  in  the  estab- 
lishment of  the  bank  of  England,  and  as  a  source  of  securi- 
ty, is  worthy  of  imitation.  The  consequence  of  exceeding 
the  limit  there  is,  that  each  stockholder  is  liable  for  the  ex- 
cess, in  proportion  to  his  interest  in  the  bank.  When  it  is 
considered,  that  the  directors  owe  their  appointments  to  the 
choice  of  the  stockholders,  a  responsibility  of  this  kind  on 
the  part  of  the  latter,  does  not  appear  unreasonable.  But  on 
the  other  hand  it  may  be  deemed  a  hardship  upon  those  who 
may  have  dissented  from  the  choice.  And  there  are  many 
among  us,  whom  it  might  perhaps  discourage  from  becoming 
concerned  in  the  institution.  These  reasons  have  induced 
the  placing  of  the  responsibility  upon  the  directors,  by  whom 
the  limit  prescribed  should  be  transgressed. 

The  interdiction  of  loans  on  account  of  the  United  States, 
or  of  any  particular  state,  beyond  the  moderate  sum  specified, 
or  of  any  foreign  power,  will  serve  as  a  barrier  to  executive 
encroachments,  and  to  combinations  inauspicious  to  the 
safety,  or  contrary  to  the  policy  of  the  Union. 

The  limitation  of  the  rate  of  interest  is  dictated  by  the 
consideration,  that  different  rates  prevail  in  different  parts  of 
the  Union  ;  and  as  the  operations  of  the  bank  may  extend 


HAMILTON'S    REPORT. 

through  the  whole,  some  rule  seems  to  be  necessary.  There 
is  room  for  a  question,  whether  the  limitation  ought  not 
rather  to  be  to  five,  than  to  six  per  cent.,  as  proposed.  It  may 
with  safety,  be  taken  for  granted,  that  the  former  rate  would 
yield  an  ample  dividend  ;  perhaps  as  much  as  the  latter,  by 
the  extension  which  it  would  give  to  business.  The  natural 
effect  of  low  interest  is  to  increase  trade  and  industry  ;  be- 
cause undertakings  of  every  kind  can  be  prosecuted  with 
greater  advantage.  This  is  a  truth  generally  admitted  ; 
but  it  is  requisite  to  have  analyzed  the  subject  in  all  its  re- 
lations, to  be  able  to  form  a  just  conception  of  the  extent  of 
that  effect.  Such  an  analysis  cannot  but  satisfy  an  intelli- 
gent mind,  that  the  difference  of  one  per  cent,  in  the  rate  at 
which  money  may  be  had,  is  often  capable  of  making  an 
essential  change  for  the  better,  in  the  situation  of  any  coun- 
try or  place. 

Every  thing,  therefore,  which  tends  to  lower  the  rate  of 
interest,  is  peculiarly  worthy  of  the  cares  of  legislators.  And 
though  laws  which  violently  sink  the  legal  rate  of  interest 
greatly  below  the  market  level,  are  not  to  be  commended,  be- 
cause they  are  not  calculated  to  answer  their  aim  ;  yet,  what- 
ever has  a  tendency  to  effect  a  reduction,  without  violence  to 
the  natural  course  of  things,  ought  to  be  attended  to  and  pur- 
sued. Banks  are  among  the  means  most  proper  to  accom- 
plish this  end ;  and  the  moderation  of  the  rate  at  which  their 
discounts  are  made,  is  a  material  ingredient  towards  it ;  with 
which  their  own  interest,  viewed  on  an  enlarged  and  perma- 
nent scale,  does  not  appear  to  clash. 

But  as  the  most  obvious  ideas  are  apt  to  have  greater  force 
than  those  which  depend  on  complex  and  remote  combina- 
tions, there  would  be  danger  that  the  persons  whose  funds 
must  constitute  the  stock  of  the  bank,  would  be  diffident  of 
the  sufficiency  of  the  profits  to  be  expected,  if  the  rate  of  loans 
and  discounts  were  to  be  placed  below  the  point  to  which 
they  have  been  accustomed  ;  and  might,  on  this  account,  be 
indisposed  to  embarking  in  the  plan.  There  is,  it  is  true. 


HAMILTON  ri    UUl'ullX.  (J3 

one  reflection,  which,  in  regard  to  men  actually  engaged  in 
trade,  ought  to  be  a  security  against  this  danger  ;  it  is  this, 
that  the  accommodations  which  they  might  derive  in  the  way 
of  their  business,  at  a  low  rate,  would  more  than  indemnify 
them  for  any  difference  in  the  dividend  ;  supposing  even  that 
some  diminution  of  it  were  to  be  the  consequence.  But  upon 
the  whole,  the  hazard  of  contrary  reasoning  among  the  mass 
of  moneyed  men,  is  a  powerful  argument  against  the  experi- 
ment. The  institutions  of  the  kind  already  existing,  add  to 
the  difficulty  of  making  it.  Mature  reflection,  and  a  large 
capital,  may,  of  themselves,  lead  to  the  desired  end. 

The  last  thing  which  requires  any  explanatory  remark,  is 
the  authority  proposed  to  be  given  to  the  president,  to  sub- 
scribe to  the  amount  of  two  millions  of  dollars,  on  account  of 
the  public.  The  main  design  of  this  is,  to  enlarge  the  specie 
fund  of  the  bank,  and  to  enable  it  to  give  a  more  early  ex- 
tension to  its  operations.  Though  it  is  proposed  to  borrow 
with  one  hand  what  is  lent  with  the  other,  yet  the  disburse- 
ment of  what  is  borrowed  will  be  progressive,  and  bank  notes 
may  be  thrown  into  circulation  instead  of  the  gold  and  silver. 
Besides,  there  is  to  be  an  annual  reimbursement  of  a  part  of 
the  sum  borrowed,  which  will  finally  operate  as  an  actual  in- 
vestment of  so  much  specie.  In  addition  to  the  inducements 
'.o  this  measure,  which  result  from  the  general  interest  of  the 
government  to  enlarge  the  sphere  of  the  utility  of  the  bank, 
there  is  this  more  particular  consideration,  to  wit :  that  as  far 
as  the  dividend  on  the  stock  shall  exceed  the  interest  paid  on 
the  loan,  there  is  a  positive  profit. 

The  secretary  begs  leave  to  conclude  with  this  general  ob- 
servation— that  if  the  bank  of  North  America  shall  come  for- 
ward with  any  propositions,  which  have  for  their  object  the 
ingrafting  upon  that  institution  the  characteristics  which  shall 
appear  to  the  legislature  necessary  to  the  due  extent  and 
safety  of  a  national  bank,  there  are,  in  his  judgment,  weighty 
inducements  to  giving  every  reasonable  facility  to  the  mea- 
«ure.  Not  only  the  pretensions  of  that  institution,  from  its 


>  LATE  BANK  OF  THE  UNITED  STATED, 

original  relation  to  the  government  of  the  United  States,  and 
from  the  services  it  has  rendered,  are  such  as  to  claim  a  dis- 
position favorable  to  it,  if  those  who  are  interested  in  it  are 
willing,  on  their  part,  to  place  it  on  a  footing  satisfactory  to  the 
government,  and  equal  to  the  purposes  of  a  bank  of  the  United 
States  ;  but  its  co-operation  would  materially  accelerate  the 
accomplishment  of  the  great  object,  and  the  collision  which 
might  otherwise  arise,  might,  in  a  variety  of  ways,  prove 
equally  disagreeable  and  injurious.  The  incorporation  or 
union  here  contemplated,  may  be  effected  in  different  modes, 
under  the  auspices  of  an  act  of  the  United  States,  if  it  shall 
be  desired  by  the  Bank  of  North  America,  upon  terms  which 
shall  appear  expedient  to  the  government. 
All  which  is  humbly  submitted. 

ALEXANDER  HAMILTON, 

Secretary  of  the  Treasury. 


THE  LATE  BANK  OF  THE  UNITED  STATES. 

This  institution,  though  no  longer  existing,  has  rendered 
to  government,  and  to  the  community  at  large,  so  many  es- 
sential services,  that  its  history  will  not  be  uninteresting.  The 
idea  of  it  was  conceived  immediately  after  the  adoption  of 
the  present  constitution,  by  Alexander  Hamilton,  Esq.,  then 
secretary  of  the  treasury.  The  acute  intellect  and  enlarged 
mind  of  this  man,  caused  him  to  master  every  subject  to 
which  his  attention  was  directed,  and  to  embrace  it  in  all  its 
details  and  consequences,  whether  immediate  or  remote.  It 
had  not  escaped  him,  that  the  work  of  the  revolution  would 
remain  unfinished,  without  a  solemn  compact,  which  should 
give  to  the  new  born  political  society  consistency  and  shape, 
and  unite  its  wide  spread  members  into  a  well  organized 
commonwealth.  His  efforts,  therefore,  as  his  writings  testify, 
had  been  directed  towards  effecting  the  formation  of  a  con«ti 


BANK  UP  THE   LMTED  fcTATEc.  95 

lution,  and  causing  it  to  be  adopted.  But  when  this  was  at 
tained,  he  perceived  further,  that  in  order  to  give  permanency 
to  the  new  fabric,  it  was  necessary  to  render  it  respected 
abroad,  and  to  strengthen  it  by  the  support  of  self-interest  at 
home  ;  he  perceived  that  it  was  necessary  to  raise  the  edifice 
of  public  credit,  and  that  this  could  only  be  attempted  with 
success,  by  raising  it  on  the  basis  of  justice  and  good  faith. 

This  required  that  the  general  government  should  acknow- 
ledge the  debts  contracted  during  the  revolutionary  struggle, 
make  provision  for  the  regular  discharge  of  the  accruing  in- 
terest, and  for  an  ultimate  payment  of  the  principal  itself. 

They  were  consequently  funded  ;  a  system  of  revenue  was 
created,  to  meet  the  future  expenditures ;  and  nothing  could 
be  happier  than  the  further  idea  of  establishing  a  NATIONAL 
BANK,  the  stock  of  which  was  chiefly  to  consist  in  public  se- 
curities, in  order  to  procure  at  once  to  those  securities  a  great 
market  value,  give  precision  and  method  to  the  fiscal  ope- 
rations of  the  new  government,  and  blend  its  stability  with 
the  comforts  of  individual  existence.  It  would  also  have  the 
advantage  of  turning  credit  into  capital,  and  enable  the  coun- 
try to  procure  from  abroad  the  innumerable  things  which 
were  wanted,  to  start  with  vigor  in  the  career  of  industry, 
though  nearly  exhausted  with  the  efforts  to  attain  inde- 
pendence. 

The  plan  of  such  a  bank  was  therefore  submitted  to  con- 
gress on  the  13th  December,  1790.  It  was  opposed  in  con- 
gress, by  the  party  then  in  the  minority,  but  who  have  since 
come  into  favor,  chiefly  on  the  ground  of  the  presumed  un- 
constitutionality  of  the  measure  proposed.  The  power  of 
creating  a  bank,  or  any  corporate  body  whatever,  not  having 
been  expressly  delegated  to  congress,  it  was  contended  that 
no  such  power  was  possessed.  The  cabinet  was  divided  on 
the  question,  as  well  as  the  public  councils.  The  then  secre- 
tary of  state  in  particular  argued,  that  though  the  constitu- 
tion, in  a  summary  manner,  granted  to  congress  power  to 
pass  such  laws  as  were  necessary  to  carry  the  specified 


96  LATE  BANK  OF  THE  UNITED  STATES. 

powers  into  effect,  yet  this  clause  could  only  be  considered  as 
applicable  to  acts,  in  justification  of  which  there  could  be 
pleaded  an  absolute,  paramount,  and  irresistible  necessity  : 
not  to  those  which,  like  the  bank  proposed,  would  only 
rest  on  the  grounds  of  expediency,  superior  convenience; 
precedent,  and  general  usefulness. 

The  manly  understanding,  however,  of  the  secretary  of 
the  treasury,  and  the  practical  wisdom  of  the  august  chief 
then  at  the  head  of  the  nation,  could  not  be  swayed  by  gram- 
matical considerations  so  futile.  The  former  investigated  the 
question,  and  refuted  the  pretended  constitutional  objection, 
with  a  force  of  reasoning  which  could  not  fail  to  remove  all 
doubts  on  the  subject  from  every  sound  and  unprejudiced 
mind  ;  and  the  latter,  consequently,  gave  his  sanction  to  the 
act  of  congress  incorporating  the  bank,  which  passed  into  a 
law  on  the  25th  February,  of  the  year  following.  Agreeable 
to  this  law,  the  capital  stock  of  the  Bank  of  the  United 
States  was  limited  to  25,000  shares  of  $400  each, 

$10,000,000, 

payable  one  fourth  in  gold  and  silver,  and  three  fourths  in 
public  securities,  bearing  an  interest  of  six  and  three  per  cent. 
The  corporation  were  restricted  from  contracting  debts  be- 
yond the  amount  of  their  capital,  and  from  holding  property 
exceeding  in  value  $15,000,000, 

or  real  estate  more  than  necessary  for  the  convenient  trans- 
acting of  their  business.  The  affairs  of  this  bank  were  to  be 
managed  by  twenty-four  directors,  to  be  elected  by  the  stock- 
holders. Only  citizens  of  the  United  States,  and  stockholders,, 
were  eligible  as  such.  Only  three  fourths  of  their  number 
could  be  re-elected  every  succesding  year  ;  and  several  other 
regulations  were  contained  in  the  charter,  generally  well 
calculated  to  guard  against  political  danger  from  this  national 
establishment,  to  extend  its  usefulness,  and  confirm  its  so- 
lidity. The  duration  of  the  bank  was  limited  to  the  4th  of 
March,  1.811. 


LATE  BANK  OF  THE  UNITED  STATE.-.  97 

The  subscriptions  were  •filled  as  soon  as  opened.  The 
government,  conformably  to  the  right  reserved  in  the  charter, 
subscribed  for  5000  shares,  equal  to  $2,000,000. 

and  the  bank  went  into  immediate  operation.  The  divi- 
dends were  semi-annually.  Its  stock,  a  great  proportion 
of  which  was  held  in  Europe,  soon  rose  considerably  above 
par,  and  the  institution  proved  always  convenient ;  on  some 
occasions  eminently  useful  to  the  government,  and  not  less 
beneficial  to  the  public,  at  large. 

This  bank  made  an  average  annual  dividend  of  eight  and 
one  third  per  cent.,  during  the  continuance  of  its  charter  oi 
twenty  years,  amounting  to  $1.6,666,666  ; 

and  from  a  report  of  the  trustees  of  that  institution,  made  a 
few  months  since,  the  public  are  given  to  expect  further  divi- 
dend. 

It  is  now  a  well  known  historical  fact,  that  in  the  infancy 
of  our  republic,  we  were  but  little  respected  by  foreign  nations, 
and  by  some  scarcely  acknowledged,  until  we  had  established 
a  sound  and  efficient  national  system  of  finance.  This  bank, 
exhibiting  the  profound  wisdom  of  its  projectors,  tended 
greatly  to  establish  not  only  stability  of  character  at  home, 
but  to  command  respect  abroad.  \Besides  the  facilities  afforded 
to  the  government,  the  public  at  large  reaped  an  advantage 
from  this  institution,  during  its  existence,  as  above  stated,  to 
the  amount  of  $16,666,666 ;  and  it  is  altogether  doubtful, 
whether,  under  the  then  situation  of  the  country,  an  equal 
sum  could  have  been  realized  from  an  investment,  in  the 
ordinary  course  of  the  then  business,  to  double  the  amount. 

Yet  \yhen  the  period  of  the  termination  of  its  charter  ar- 
rived, and  the  stockholders  applied  to  congress  for  the  re- 
newal of  it,  the  same  objection  of  unconstitutionality,  which 
had  been  successfully  combated  twenty  years  before,  was 
again  revived.  The  institution  had  become  the  more  invi* 
dious  to  the  party  in  power,  for  having  been,  at  its  very  ori- 
gin, unsuccessfully  opposed  by  their  principal  leader ;  an  op- 
position, which  perhaps  even  then  arose  from  the  desirfe  of 

13 


98  BANK  OP  THE  UNITED  STATES. 

signalizing  a  system  of  political  principles  and  measures,  dif- 
ferent from  those  which  were  adopted.  When  the  subject 
came  now  again  under  discussion,  the  force  of  sound  argu- 
ment, the  considerations  of  general  usefulness,  and  the  un- 
questionable fiscal  expediency  of  the  renewal  of  the  charter, 
could  not  be  expected  to  prevail  against  unfriendly  senti- 
ments of  so  long  standing. 

An  impulse  was  given  accordingly,  the  renewal  of  the 
charter  refused,  and  the  institution  dissolved.  The  public 
prosperity  might  have  received  a  severe  shock,  and  the  go- 
vernment itself  been  exposed  to  difficulties  and  embarrass- 
ments, much  more  serious  than  those  under  which  it  must 
now  necessarily  labor,  from  the  want  of  a  national  bank,  if 
the  same  course  of  deliberate  prudence,  which  has  marked 
the  conduct  of  the  late  Bank  of  the  U.  States  throughout,  had 
not  been  also  pursued  in  their  mode  of  withdrawing  from  bu- 
siness. But  they  proceeded  in  this  work  so  slowly,  and  acted 
towards  individual  debtors,  and  towards  other  banks  on  which 
they  had  claims,  with  so  much  liberal  forbearance,  that  time 
was  gained  to  supply  the  public  with  the  circulating  medium 
of  new  bank  credits,  in  lieu  of  those  to  be  withdrawn ;  a  con- 
duct which  was  moreover  dictated  by  the  interests  of  the  ex- 
piring institution  itself,  and  signally  favored  by  the  general 
stagnation  of  commerce,  at  the  period  in  which  it  took  place. 


BANK  OF  THE  UNITED  STATES. 

The  present  BANK  OF  THE  UNITED  STATES,  located  at 
Philadelphia,  with  branches  in  the  several  states,  was  created 
by  an  act  of  congress  of  the  3d  March,  18 16,  to  endure  twenty 
years,  composed  of  350,000  shares  of  $100  each.  The 
United  States  hold  in  five  per  cent,  stock;  70,000  shares, 

$  7,000,000 
Individuals  hold  280.000  share?.  28.000,000 

$35,000.000 


BANK  OP  THE  UNITED  STATES.  99 

The  president  of  the  bank  at  New  York,  is  ex  officio  loan 
officer  of  the  United  States,  for  the  state  of  New  York.  This 
bank  collects  the  revenue  of  the  United  Spates,  and  pays 
the  debts  of  the  United  States  in  every  commercial  city 
where  a  branch  is  established.  Its  dividends,  from  the 
commencement  to  the  present  year,  (1 830,)  inclusive,  amount 
to  $70.10,  making  $24,535,000. 

Although  this  institution  has  been  assailed  by  foes  within 
and  foes  without,  and  sustained  severe  losses,  it  has  continued 
an  undeviating  course,  shedding  light,  health,  activity,  and 
vigor  throughout  the  body  politic.  And  while  it  sustains 
and  enlivens  the  fiscal  concerns  of  the  nation,  it  gives  em- 
ployment to  many  thousands  of  persons  in  its  operations — 
constantly  bearing  on  its  fore  front,  in  bold  relief,  this  impe- 
rative language  to  the  powers  that  be: 

"  Sta  per  te  ipsum,  et  permitte  nos  essc  solos." 

The  history  of  this  institution  is  fully  detailed,  and  its 
prosperous  condition  clearly  manifest,  from  the  following 
statement,  extracted  from  their  own  authorized  publication. 


REPORT  on  the  condition  of  the  BANK  OF  THE  UNFTED 
STATES,  by  the  committee  of  inspection  and  investiga- 
tion ;  and  afterwards  adopted  by  the  stockholders. 

At  a  triennial  meeting  of  the  stockholders  of  the  Bank 
of  the  United  States,  held  by  adjournment  at  their  hall  in  the 
city  of  Philadelphia,  on  Tuesday,  the  1st  of  October,  1822— 

THOMAS  ELLICOTT,  Esq.,  in  the  Chair,  and 
WILLIAM  MEREDITH,  Secretary. 

The  following  report  of  the  committee  of  inspection  and 
investigation,  appointed  agreeably  to  the  resolution  of  the 
stockholders,  at  the  meeting  held  on  the  2d  of  September. 
1822,  having  been  adopted,  it  was  "  Resolved  that  the  re- 
port, with  its  appendix,  be  published  in  the  public  papers : 


1UU  BANK  OF  THE  UNITED  STATi>. 

and  that  the  president  and  directors  of  the  Bank  ol  the 
United  States  do  also  cause  the  same  to  he  published  in  pam- 
phlet form,  and  that  a  copy  thereof  be  held  at  the  disposal  of 
each  stockholder/' 

Your  committee,  to  whom  was  referred  an  examination  of 

the  condition  of  the  bank. 
Report, 

That  they  have  carefully  considered  and  diligently  investi- 
gated the  subject  confided  to  them.  But,  before  submitting  any 
opinion  or  statement  in  detail,  as  to  its  actual  situation,  they 
beg  leave  to  refer  to  the  luminous  exposition  of  the  president, 
hereto  appended,  containing  a  fund  of  information  in  rela- 
tion to  the  institution  in  connection  with  various  topics  of 
sound  speculation  and  practical  utilit)^  which  cannot  fail  to 
prove  highly  interesting  to  the  stockholders  and  to  the  pub- 
lic ;  while,  at  the  same  time,  they  illustrate  the  consoling 
truth  that  the  most  appalling  difficulties  may  be  surmounted 
by  the  steady  application  of  industry,  integrity,  and  talent. 

In  compliance  with  the  provisions  of  the  13th  article  of 
the  llth  section  of  the  charter,  your  committee  have  ascer- 
tained that  the  suspended  debts  at  the  bank,  and  its  various 
branches,  are 

Dolls.        Cts. 

Upon  personal  and  other  than  stock  secu- 
rities, 6,401,255  90 

And  upon  loans  secured  by  pledges  of 

stock.  -  4,017,050  76 


Together  amounting  to  10,418,306  66 


Your  committee  are  decidedly  of  opinion,  that  the  loss  to 
the  Bank  upon  this  debt,  together  with  overdrafts,  counterfeit 
checks,  and  from  all  other  sources,  cannot  exceed  3,743,899 
dollars,  a  loss  arising  partly  from  the  peculiar  situation  of  the. 


BANK  OF  Till-:   LXITED  STATE,-.  HlJ 

moneyed  relations  of  the  country,  but  principally  from  a  mis- 
placed confidence  in  unworthy  agents.  But  your  committee 
feel  gratified  in  saying,  that  a  fund  more  than  sufficient  has 
been  derived  from  the  previous  profits  of  the  bank,  and  spe- 
cifically pledged,  and  set  apart  to  meet  this  loss  ;  besides 
which  it  possesses  a  surplus  of  971,425  dollars  41  cents, 
arising  from  a  balance  which  stood  to  the  credit  of  the  profit 
and  loss  account  on  the  1st  of  July  last,  from  interest  which 
has  actually  accrued,  but  which  has  not  yet  been  paid,  upon 
that  portion  of  the  suspended  debts  which  it  is  confidently 
believed  will  be  ultimately  obtained,  and  from  the  advance 
above  par  upon  37,954  shares  United  States  Bank  stock, 
held  by  the  bank,  estimated  as  worth  four  dollars  per  share 
above  the  par  value. 

The  preceding  facts,  with  the  following  analysis,  your 
committee  feel  assured  will  render  the  conviction  irresistible, 
that  the  Bank  of  the  United  States  has  now  arrived  at  that 
point  when  its  capital  may  be  declared  to  be  sound  and  en- 
tire, while  it  possesses  contingent  interests  of  nearly  one  mil- 
lion of  dollars,  to  be  applied  to  such  objects  as  the  future  ad- 
ministrators of  its  affairs  may  deem  advisable. 

Dolls.        Cts. 

DR.  Bank  of  the  United  States,  to  stock- 
holders, for  capital  paid  in,  -  34,992,139  63 

The  sum  paid,  but  not  yet  extinguished, 
for  bonus,  premium  on  four  millions  of  5  per 
cent,  government  stock,  and  for  banking- 
houses,  provided  for,  and  to  be  extinguished 
by  the  semi-annual  appropriation  of  60,000 
dollars,  2,015,802  15 

Estimate  of  all  the  losses  of  the  bank,  up 
to  the  present  period,  3,743,899  00 

Balance.   -  971,425  41 


41,723,266  19 


102 


BANK  OP  THE  UNITED  STATES. 


CR.  Bank  of  the  United  States,  by  capi- 
tal paid  in,  - 

The  sum  which  has  been  paid  on  bonus, 
premium  on  four  millions  5  per  cent,  govern- 
ment stock  and  banking  houses,  and  which 
will  be  extinguished  by  a  semi-annual  ap- 
propriation of  60,000  dollars, 

Value  of  banking  houses  which  have  cost 
834,922  dollars  15  cents,  but  which,  at  the 
expiration  of  the  charter,  will  not  then  stand 
on  the  books  of  the  bank  at  a  value  more 
than  - 

Contingent  fund  of  3,550,000  dollars, 
which  will  be  increased  by  the  transfer  of 
193,899  dollars  from  the  balance  of  the  pro- 
fit and  loss  account  as  it  stood  on  the  1st  of 
July  last,  to  cover  the  losses  sustained,  - 

The  balance  that  will  remain  of  what  ap- 
peared to  the  credit  of  the  profit  and  loss 
account  on  the  1st  of  July,  after  having 
transferred  to  contingent  fund,  193,899  dol- 
lars, 

The  interest  which  has 
accrued  on  suspended  debts 
amounting  to  1,279,520  54 

After  deducting  interest 
on  that  portion  which  is 
deemed  bad  of  -  511,808  20 

Advance  above  par  on  37,954  shares  of 
stock  of  the  Bank  of  the  United  States, 
which  it  holds — say  four  dollars,,  per  share, 


Dolls.        Cts. 

34,992,139  63 


1,620,000  00 


395,802  15 


3,743.899  00 


51.897  07 


767,712  34 

151,816  00 
41.723.266  19 


BANK  OF  THE  UNITED  STATES.  103 

in  addition  to  the  above,  the  committee  deem  it  proper  to 
exhibit  the  following  brief  view  of  the  present  actual  situa- 
tion of  the  funds  of  the  bank,  and  of  their  distribution  : 

Dolls.        Cls. 

The  capital  of  the  bank  paid  in  is  -  34,992,139  63 
The  circulation  of  bank  notes,  amounts  to  5,456,891  90 
The  deposits  are,  -  6,776,492  74 
Unclaimed  dividends,  129,741  28 
Amount  due  to  sundry  banks,  in  current  ac- 
count, and  to  individuals  in  Europe,  1,964,898  36 
Fund  reserved  to  cover  the  losses  sustained 

by  the  bank,  -                                   -  3,743,899  00 
Profit  and  loss  account,  after  having  trans- 
ferred to  contingent  fund  193,899  dollars,  51,897  07 
Interest,  discounts,  &c.,  received  from  1st  of 

July  to        September,     -  388,237  01 


The  total  amount  of  funds,  are  53,504,196  99 


Which  are  distributed  as  follows  : 
In  United  States  5  per  cent,  stock,     -  11,000,000  00 

United  States  6  percent,  stock,  2,020,469  27 

Loans  on  personal  security,  -  -     26,236,150  88 

Loans  secured  by  bank  stock,  5,974,725  80 

Loans  secured  by  mortgage,  8,000  00 

Due  by  state  banks,  bearing  interest,  739,918  76 

Real  estate  taken  for  debt,  part  of  which  is 

productive,  -  587,102  38 

Amount  due  by  sundry  state  banks,  &c., 

in  current  account,  -    ,      910,950  97 

Paid  on  account  of  bonus,  and  premium 

on  5  per  cent,  stock,  1,180,880  00 

Banking    house    in    Philadelphia,    and 

branches  cost  834,922  15 

Notes  of  state  banks  on  hand,  664,642  56 

Specie  in  United  States  Bank  and  branches,   3,346,434  22 


53,504.196  99 


1U4  liANK  OF  THE  UNITED  STATES. 

It  might  be  deemed  prudent  to  abstain  from  expressing 
an  opinion  upon  the  future  prospects  of  the  bank,  leaving 
each  individual  to  draw  his  own  inferences  from  the  facts- 
exhibited  ;  yet  your  committee  are  unwilling  to  omit  the  ex- 
pression of  what  they  believe  to  be  a  well  grounded  hope, 
that  the  profits  of  the  bank,  and  its  public  utility  will  continue 
to  increase  with  the  gradual  development  of  its  resources.  If 
the  bank  has,  under  the  embarrassment  and  perplexity  in 
which  it  has  been  placed,  not  only  sustained  its  own  credit, 
but  that  of  the  circulating  medium  of  the  country,  with 
which  its  interest  and  prosperity  are  indissolubly  connected,  it 
can  scarcely  be  doubted,  that  these  difficulties  being  sur- 
mounted, and  a  more  ample  field  opened  for  the  exercise  of 
its  energies,  an  increase  of  profit  will  result  from  a  correspond- 
ing extension  of  its  business.  And  whilst  your  committee 
have  found  it  impracticable  to  view  this  institution,  in  any 
other  light,  than  as  an  establishment  to  effect  great  national 
objects,  they  have  been  compelled  to  remark  that,  though 
these  objects  have  been  most  fully  attained,  the  institution  it- 
self has  not  received  the  support,  which  it  is  clearly  the 
interest  of  the  nation  to  afford. 

The  past  history  of  the  bank  has  proved  that,  where  a 
sense  of  moral  obligation  is  wanting,  the  existing  laws  are 
inadequate  to  deter  the  agents  of  the  bank  from  the  commis- 
sion of  frauds  upon  its  vaults.  Your  committee  therefore 
advise  that  the  president  and  directors  present  to  congress 
u  respectful  memorial,  praying — 1st,  The  enactment  of  effi- 
cacious laws,  that  adequate  punishments  may  be  inflicted 
upon  such  agents  of  the  bank  as  may  be  guilty  of  malversa- 
tion in  office.  2dly,  That  they  ask  an  alteration  in  that 
part  of  the  charter  which  requires  that  all  the  notes  of  the 
bank  which  are  payable  on  demand  shall  be  received  in  pay- 
ment of  debts  due  to  the  government,  inasmuch  as  this  re- 
quisition, as  heretofore  construed,  has  not  only  the  tendency 
to  prevent  the  bank  from  restoring  to  some  sections  of  the 
country  a  sound  circulating  medium,  but  it  may  occur  that 


BANK  OF  THE   UNITED  STATES.  105 

the  bank  cannot  safely  place  to  the  credit  of  the  government, 
in  cash,  notes  at  one  office,  which,  according  to  the  contract 
on  the  face  of  them,  are  payable  at  a  different  and  distant 
office  alone,  and  where  only  funds  have  been  placed  for  their 
redemption. 

Though  your  committee  are  aware,  that  not  only  the  con- 
venience of  the  public  but  the  interest  of  the  institution  re- 
quire an  additional  emission  of  its  notes,  and  although  they 
believe,  that  with  a  reasonable  degree  of  exertion  on  the  part 
of  the  cashier,  these  may  be  executed  and  put  in  circulation, 
while  the  business  of  the  bank  is  confined  to  its  present  limit ; 
yet  they  are  satisfied  that  a  considerable  extension  of  the  or- 
dinary business  of  the  institution,  would  render  it  wholly  im- 
possible for  its  officers  to  perform  this  service :  it  is  therefore 
respectfully  suggested,  that  congress  be  prayed  also  to  pass  a 
law,  authorizing  other  agents  of  the  bank  to  sign  its  notes, 
and  in  the  mean  time  the  committee  recommend  that  the 
best  means  in  the  power  of  the  president  and  directors  be 
taken,  to  put  in  circulation  a  large  additional  amount  of  notes, 
not  exceeding  the  denomination  of  twenty  dollars. 

Your  committee  have  not  discovered  that  any  serious  con- 
sequences have  resulted  to  the  interests  of  the  bank  (except 
those  which  have  been  followed  by  a  public  exposure)  from 
a  want  of  obedience  in  distant  agents  ;  they  nevertheless 
deem  it  proper  to  advise,  that  the  president  and  directors  of 
the  parent  bank  keep  steadily  in  view  the  absolute  necessity 
of  enforcing  its  own  orders  through  all  the  various  depart- 
ments of  the  institution  ;  without  which,  neither  harmony 
can  be  expected  in  its  administration,  nor  security  to  the  in- 
terests of  its  stockholders. 

Your  committee  feel  much  gratification  in  being  able  to 
state,  that  the  current  expenses  of  the  bank  have  been  essen- 
tially reduced  since  the  year  1819,  and  while  it  might  be  sup- 
posed that  the  present  embarrassed  state  of  the  commerce  of 
the  country,  and  the  limited  amount  of  interest  heretofore 
divided  upon  the  capital  of  the  bank,  are  strong  admonitions 

14 


106  BANK  OF  THE  UNITED  STATES. 

to  your  agents  to  observe  the  most  rigid  economy ;  yet,  inas- 
much as  the  splendid  edifice  in  which  you  are  assembled, 
is  now  so  nearly  completed,  they  cannot  but  recommend  that 
it  be  finished,  provided  the  expense  shall  not  exceed  25,000 
dollars. 

In  taking  into  view  the  business  of  the  bank  as  connected 
with  its  different  offices,  the  committee  think  it  right  to  re- 
commend to  the  continued  attention  of  the  president  and  di- 
rectors the  necessity  of  withdrawing  those  branches  which 
are  found  to  be  unprofitable,  and  transferring  their  funds  to 
those  offices  which  shall  seem  to  require  additional  capital. 

Your  committee  take  great  pleasure  in  unanimously  de- 
claring that  the  circumstances  of  the  bank  fully  realize  the 
anticipations  of  the  stockholders,  as  expressed  at  their  last 
meeting,  in  regard  to  the  president,  who,  by  his  talents,  dis- 
interestedness, and  assiduity,  has  placed  its  affairs  in  an  at- 
titude so  safe  and  prosperous,  as  that  the  burden  of  duty  de- 
volving upon  his  successor  will  be  comparatively  light. 

THOS.  ELLICOTT, 

Chairman  of  the  Committee  of  Inspection  and  Investigation. 
Bank  of  the  United  States,  Oct.  1st,  1822. 


EXPOSITION. 

The  stockholders  generally  have  never  had  any  view  of 
the  progress  of  the  bank  submitted  to  them.  At  the  trien- 
nial meeting,  in  1819,  it  was  my  intention  to  have  given 
them  such  a  view.  I  was,  however,  advised  that  it  would 
be  more  expedient  to  reserve  the  communication  for  a  com- 
mittee, and  my  opinion  was  cheerfully  surrendered.  But  as 
it  is  my  determination  in  a  few  months  to  quit  the  station 
with  which  you  have  honored  me,  and  as  my  silence  on  a 
former  occasion  has  kept  you,  as  well  as  the  public,  in  a  great 
measure  ignorant  of  the  difficulties  in  which  I  found  the 
bank,  and  has  subjected  the  administration,  of  which  I  have 


BANK  OF  THE  I'NITKH  STAT!  LOT 

been  a  member,  to  censures  which  were  unfounded,  and 
which  have  fallen  in  many  instances  from  the  lips  of  the  very 
persons  who  were  the  authors  of  the  errors  and  mismanage- 
ments, to  use  no  harsher  language,  by  which  this  institution 
was  brought  to  the  verge  of  bankruptcy  and  ruin,  I  will  now 
present  to  you  a  short  view  of  the  progress  and  present  state 
of  the  bank.  You  will  probably  raise  a  committee  of  inspec- 
tion and  investigation,  and  as  far  as  any  facts  or  circum- 
stances which  I  shall  present  may  be  deemed  material,  their 
accuracy  or  error  may  be  ascertained. 

The  institution  commenced  active  banking  operations 
about  the  1st  of  January,  1817,  and  in  the  course  of  that 
year  established  eighteen  branches,  being  all  that  have  been 
established.  One  was  projected  at  Augusta,  but  on  recon- 
sideration was  abandoned.  The  report  of  the  committee  of 
congress,  made  in  December,  1818,  has  made  you  fully  ac- 
quainted with  so  many  of  the  leading  details  of  the  previous 
management,  and  the  lapse  of  time  has  made  them  so  much 
less  interesting  than  they  would  have  been  at  an  earlier  day, 
that  I  mean  to  do  little  more,  in  relation  to  the  period  which 
preceded  1819,  than  present  the  results  as  they  will  be  ex- 
hibited in  the  state  of  the  bank  when  I  came  into  it. 

The  bank,  immediately  on  its  commencement,  did  a  very 
extensive  business,  imported  vast  sums  of  specie,  paid  its  notes 
and  those  of  the  offices,  without  reference  to  the  places  where 
they  were  payable,  at  the  bank,  and  all  the  principal  offices 
north  of  the  Potomac,  while  they  were,  under  the  charter, 
necessarily  received  every  where  in  payment  of  debts  to  the 
government  of  the  United  States  ;  and  drafts  were  given 
without  limit,  on  the  parent  bank  and  northern  offices,  by  the 
western  offices,  at  par  or  at  a  premium  merely  nominal.  As 
soon  as  the  notes  of  the  southern  or  western  offices  were  paid 
or  received  by  the  bank  and  northern  offices,  they  were  re- 
turned to  them,  and  reissued  in  perpetual  succession.  An  ac- 
companying exhibit  will  show  the  enormous  amount  of 
the  notes  of  southern  and  western  offices,  which  became 


108  BANK  OF  THE  UNITED  STATES. 

chargeable  on  the  bank,  directly  and  indirectly,  through  the 
northern  offices.  The  result  was,  that  the  bank  and  the 
great  northern  offices  were  drained  of  their  capital ;  and  on 
the  20th  of  July,  1818,  only  eighteen  months  after  the  insti- 
tution began  its  operations,  it  was  obliged  to  commence  a  rapid 
and  heavy  curtailment  of  the  business  of  the  bank  and  its 
offices.  During  all  this  time  it  had  the  advantage  of  im- 
mense government  deposits.  At  the  moment  these  curtail- 
ments were  ordered,  the  government  deposits  in  the  bank  and 
its  branches,  including  the  deposits  of  public  officers,  amounted 
to  eight  millions  of  dollars,*  and  they  had  been  larger  at  pre- 
ceding periods.  Curtailments  were  ordered,  from  time  to  time, 
at  the  southern  and  western  offices,  to  the  amount  of  seven 
millions  of  dollars,  and  at  the  parent  bank  to  the  amount  of 
two  millions,  though  at  the  latter  they  were  made  to  the 
amount  of  $3.600,000,  and  upwards,  between  the  30th  of 
July,  1818,  and  the  1st  April,  1819.  No  curtailments  were  or- 
dered at  the  offices  of  New  York  and  Boston,  because  there 
was  no  room  for  them  ;  yet  necessity  obliged  them  to  reduce 
their  business  very  much.  The  curtailments  at  all  points, 
within  the  abovementioned  dates,t  being  eight  months,  were 
$6,530,159.49.  Yet  after  these  immense  and  rapid  curtail- 
ments, the  most  sensible  and  vital  points  (Philadelphia,  New 
York,  and  Boston)  were  infinitely  in  worse  condition  than 
when  the  remedy  was  devised. 

An  accompanying  exhibit  will  show  the  distribution 
of  capital  at  the  close  of  this  period.  At  that  moment  the 
discount  line  of  the  important  office  at  Boston  was  only 
$94,584.37.  And  when  in  this  wretched  state,  the  southern 
and  western  circulation  was  pouring  in  upon  these  weak 
points,  and  the  government  at  liberty,  according  to  the  prac- 
tice of  the  time,  to  draw  on  either  office  or  the  bank  for  the 
gross  amount  of  its  deposits,  throughout  the  whole  establish- 

*  Seethe  monthly  statements,  of  the  6th  and  30th  July,  1818. 
•t  I  refer  to  the  monthly  statements  of  the  30th  July,  1818.  and  1st  April, 
1819. 


BANK  OF  THE  UNITED  STATES.  109 

ment,  whether  south,  north,  east,  or  west.  The  southern 
and  western  offices  were  not  restrained  from  issuing  their 
notes,  which  they  did  most  profusely.  The  curtailments,  in 
many  instances,  resulted  merely  in  a  change  of  debts,  bear- 
ing interest  for  debts  due  by  local  banks,  or  the  notes  of  local 
banks,  on  neither  of  which  was  interest  received.  The 
western  offices  curtailed  their  discounted  paper,  but  they  pur- 
chased what  were  called  race  horse  bills,  to  a  greater  amount 
than  their  curtailments.  The  bank  itself  continued  during 
the  whole  period,  to  purchase  and  collect  drafts  on  the  south- 
ern, and  even  western  offices,  though  almost  the  whole  active 
capital  already  lay  in  these  quarters  of  the  Union,  and  though 
the  great  object  of  the  curtailments  was  to  draw  funds  from 
these  points.  The  debt  due  in  Kentucky  and  Ohio,  instead 
of  being  reduced,  was  within  this  period  actually  increased 
upwards  of  half  a  million  of  dollars.  An  accompanying  ex- 
hibit will  show,  that  instead  of  getting  relief  from  the  south- 
ern and  western  offices  generally,  where  curtailments  had 
been  ordered,  the  bank  was  still  further  exhausted  by  the  in- 
tervening operations. 

At  the  commencement  of  this  period,  (a  period  com- 
mencing with  the  order  for  curtailments,  and  ending  March, 
1819,)  the  bank  was  indebted  to  Baring,  Brothers  &  Co., 
Reed,  Irving  &  Co.,  Adams,  Robertson  &  Co.,  and  Thomas 
Wilson  &  Co.,  the  sum  of  $1,586,345.47,  growing  princi- 
pally, if  not  entirely,  out  of  its  specie  operations.  Of  this 
sum,  the  greater  part  was  paid  during^  this  period.  It  had, 
however,  contracted  new  debts  with  Baring,  Brothers  <fc  Co., 
and  Thomas  Wilson  &  Co.,  of  which  there  remained  due, 
including  any  balance  which  may  have  been  due  on  the 
former  accounts,  the  sum  of  $876,648  ;  and  within  the  same 
period,  it  had  disposed  of  $2,270,926.65  of  its  funded  debt, 
furnishing,  by  these  compound  operations,  ways  and  means, 
in  addition  to  its  curtailments,  to  the  amount  of  $1 ,561,229.13 
— and  making,  with  these  curtailments,  a  reduction  in  the 


110  BANK  OF  THE  UNITED  STATES. 

productive  capital  of  the  bank,  within  the  period  of  eight 
months,  of  eight  millions  of  dollars,  and  upwards. 

At  the  close  of  this  period,  the  discounts  on  personal  secu- 
rity at  Philadelphia,  had  been  so  long  the  subject  of  curtail- 
ment, that  but  a  small  portion  of  them  admitted  of  further  re- 
duction, and,  after  great  efforts,  a  rule  had  been  established 
to  reduce  the  discounts  which  had  been  granted  on  the  stock 
of  the  bank,  at  the  rate  of  five  per  cent,  every  sixty  days. 
These  latter  constituted  the  bulk  of  the  discounted  paper,  and 
so  small  a  reduction  afforded  no  material  relief  against  a 
great  and  immediate  demand.  Even  this  small  reduction 
was  the  subject  of  loud,  angry,  and  constant  remonstrances 
among  the  borrowers,  who  claimed  the  privileges  and  the 
favor  which  they  contended  were  due  to  stockholders,  and 
sometimes  succeeded  in  communicating  their  sympathies  to 
the  board.  All  the  funded  debt  which  was  salable  had  been 
disposed  of,  and  the  proceeds  exhausted.  The  specie  in  the 
vaults  at  the  close  of  the  day,  on  the  1st  of  April,  1819,  was 
only  $126,745.28,  and  the  bank  owed  to  the  city  banks,  de- 
ducting balance  due  to  it,  an  aggregate  balance  of  79,125 
dollars  99  cents. 

It  is  true  there  were  in  the  mint  $267,978.9,  and  in  tran- 
situ  from  Kentucky  and  Ohio,  overland,  $250,000  ;  but  the 
treasury  dividends  were  payable  on  that  day,  to  the  amount 
of  near  $500,000,  and  there  remained  at  the  close  of  the  day 
more  than  one  half  of  the  sum  subject  to  draft,  and  the  greater 
part  even  of  the  sum  which  had  been  drawn  during  the  day 
remained  a  charge  upon  the  bank  in  the  shape  of  temporary 
deposits,  which  were  almost  immediately  withdrawn.  Ac- 
cordingly, on  the  12th  of  the  same  month,  the  bank  had  in 
its  vauks  but  $71,522.47,  and  owed  to  the  city  banks  a  ba- 
lance of  $196,418.66 ;  exceeding  the  specie  in  its  vaults 
$124,895.19.  It  must  again  be  remarked,  that  it  had  yet 
the  sum  before  mentioned  in  the  mint,  as  well  as  the  sum  in 
transitu  from  Ohio  and  Kentucky.  This  last  sum 
($250,000)  arrived  very  seasonably,  on  the  next  day,  or  a 


BANK  OF  THE  UNITED  STATES.  Ill 

day  or  two  thereafter.  The  bank  in  this  situation,  the  office 
at  New  York  was  little  better,  and  the  office  at  Boston  a 
great  deal  worse.  At  the  same  time  the  bank  owed  to  Ba- 
ring, Brothers  &  Co.,  and  Thomas  Wilson  &  Co.  nearly 
$900,000,  which  it  was  bound  to  pay  immediately,  and 
which  was  equivalent  to  a  charge  upon  its  vaults  to  that 
amount.  It  had,  including  the  notes  of  the  offices,  a  circu- 
lation of  six  millions  of  dollars  to  meet,  to  which  were  to  be 
added  the  demands  of  depositers,  public  and  private,  at  a  time 
too  when  the  scarcity  of  money  called  forth  every  disposable 
dollar,  and  therefore  created  demands  upon  the  bank  for  an 
unusual  portion  of  the  ordinary  deposits  and  circulation. 

The  sums  which  were  collected  daily  on  account  of  the 
revenue,  in  branch  paper,  were  demandable  next  day  in 
Philadelphia,  and,  at  the  same  time,  at  every  office  of  the 
establishment,  at  the  discretion  of  the  officers  of  the  govern- 
ment. The  revenue  was  principally  paid  in  branch  paper, 
as  well  at  Boston  arid  New  York  as  at  Philadelphia,  and 
while  the  duties  were  thus  paid  at  one  counter,  in  branch 
paper,  the  debentures,  which  amounted  to  one  million  of 
dollars  every  three  months,  were  demanded  and  paid  at  the 
other,  in  specie  or  its  equivalent — money  of  the  place.  Many 
additional  details,  increasing  the  difficulties  of  the  moment, 
might  be  added.  The  southern  offices  were  remitting  tar- 
dily, and  the  western  not  at  all.  All  the  resources  of  the  bank 
would  not  have  sustained  it  in  this  course  and  mode  of  busi- 
ness another  month  ! !  Such  was  the  prostrate  state  of  the 
bank  of  the  nation,  which  had  only  twenty-seven  months 
before  commenced  business  with  an  untrammeled  active 
capital  of  twenty-eight  millions  of  dollars. 

But  it  would  have  been  fortunate  for  the  institution  if  its 
danger  had  ceased  here.  There  still  remained  in  some  of  the 
trusts  of  the  bank  some  of  the  men  who  had  contributed 
most  to  involve  it  in  this  state  of  things.  As  I  must  be  brief, 
and  the  subject  is  very  extensive,  I  will  advert  only  to  the 


112  BANK  OF  THE  UNITED  STATES. 

principal  instance  of  the  misfortune  and  profligacy  to  which  I 
allude. 

In  the  office  at  Baltimore,  of  which  James  A.  Buchanan 
was  president,  and  J.  W.  M'Culloh  was  cashier,  there  were 
near  three  millions  of  dollars  discounted  or  appropriated, 
without  any  authority,  and  without  the  knowledge  of  the 
board  of  the  office,  or  that  of  the  parent  bank  !  S.  Smith, 
and  Buchanan,  of  which  firm  J.  A.  Buchanan  was  a  mem- 
ber, James  W.  M'Culloh,  and  George  Williams,  (the  latter  a 
member  of  the  parent  board,  by  the  appointment  of  the  go- 
vernment,) had  obtained,  of  the  parent  bank  discounts  in 
the  regular  and  accustomed  manner,  to  the  amount  of 
$1,957,700,  on  a  pledge  of  18,290  shares  stock  of  the  bank. 
These  men,  without  the  knowledge  of  either  board,  and  con- 
trary to  the  resolves  and  orders  of  the  parent  bank,  took  out 
of  the  office  at  Baltimore,  under  the  pretense  of  securing  it 
by  pledging  the  surplus  value  of  the  stock,  already  pledged 
at  the  parent  bank  for  its  par  value  and  more,  and  other  like 
surpluses  over  which  the  bank  had  no  control,  the  sum  of 
$1,540,000  :  this  formed  a  part  of  the  sum  before  stated  ta 
have  been  discounted  by  the  president  and  cashier  of  the  of- 
fice, without  authority.  When  this  stupendous  fraud  was 
discovered,  attempts  were  immediately  made  to  obtain  se- 
curity, and  it  was  obtained  nominally  to  the  amount  of 
$900,000.  It  was  probably  really  worth  $500,000.  For 
this  the  bank  is  principally  indebted  to  the  good  management 
of  Messrs.  Oliver,  Hoffman,  and  M'Kim,  of  Baltimore,  who 
were  at  the  time  members  of  the  parent  board. 

The  losses  sustained  at  the  office  at  Baltimore  alone,  the 
great  mass  of  which  grew  out  of  this  fraud  and  others  closely 
connected  with  it,  ha\7e  been  estimated  at  the  immense  sum 
of  $1,671,221.87.  The  aggregate  of  the  losses  of  the  insti- 
tution, growing  out  of  the  operations  which  preceded  the 
6th  March,  1819,  exceed  considerably  $3,500,000.  The 
dividends,  during  the  same  time,  amount  to  $4,410,000.  Of 
this  sum,  $1,348,558.98  were  received  as  the  interest  on  the 


BANK  OF  THli  UNITED  STATI-'.H.  113 

public  debt  held  by  the  bank,  which  leaves,  as  the  entire  pro- 
fits on  all  the  operations  of  banking,  the  sum  of  $3,061,441.2, 
which  is  less,  by  at  least  half  a  million  of  dollars,  than  the 
losses  sustained  on  the  same  business  ! 

When  I  was  invited,  and  consented  to  fill  the  station  I  now 
hold,  I  was  alike  ignorant  and  unapprehensive  of  the  situa- 
tion in  which  I  have  just  described  the  bank  (truly,  I  believe,) 
to  have  been.  I  was  at  the  moment  remotely  situated  from 
the  scenes  of  its  active  business,  and  its  important  transactions. 
I  had  held,  it  is  true,  shortly  before,  to  oblige  my  friends,  a 
place  in  the  board  of  the  office  at  Charleston,  at  which  I  oc- 
casionally attended,  and  from  what  I  saw  there,  as  well  as 
from  the  public  facts  concerning  the  transactions  of  the  bank, 
I  was  satisfied  that  there  was  a  great  want  of  financial  talent 
in  the  management  of  it.  But  I  had  not  the  faintest  idea 
that  its  power  had  been  so  completely  prostrated,  or  that  it 
had  been  thus  unfortunately  managed,  or  grossly  defrauded. 
I  never  imagined  that  when  it  had,  at  so  much  expense  and 
loss,  imported  so  many  millions  of  specie,  they  had  been  en- 
tirely exhausted,  and  were  not  yet  paid  for  ;  nor  that  the 
bank  was  on  the  point  of  stopping  payment.  It  was  not 
until  the  moment  I  was  about  to  commence  my  journey  to 
Philadelphia,  that  I  was  apprized  by  a  letter  from  a  friend, 
who  had  been  a  member  of  the  preceding  board,  that  he 
feared,  in  a  few  months,  the  bank  would  be  obliged  to  stop 
payment. 

This  was,  indeed,  appalling  news.  When  I  reached  Wash- 
ington, I  received  hourly  proofs  of  the  probability  of  this 
event.  In  Philadelphia  it  was  generally  expected.  My 
memory  deceives  me  much  if  I  found  any  one  in  or  out  of 
the  bank,  who  entertained  a  sanguine  belief  of  its  being  able 
to  sustain  its  payments  much  longer.  On  the  contrary  there 
was  (I  think  it  cannot  be  forgotten)  a  public  and  general 
expectation  that  the  nation  was  about  to  suffer  the  calamity 
of  a  currency  composed  entirely  of  irredeemable  paper.  The 
evil  which  thus  threatened  the  country,  is  not  at  all  to  be  com- 

15 


114  BANK  OF  THE  UNITED  STATES* 

pared  with  the  suspension  of  a  sound  currency  in  times  of 
war  and  great  national  emergencies.  The  former  can  only 
be  conceived  by  a  people  who  have  suffered  under  a  paper 
currency  in  profound  peace.  What  a  train  of  evils  does  it 
produce  ?  The  destruction  of  public  and  private  credit,  the 
national  torpor,  the  individual  ruin,  the  disgraceful  legislation 
and  the  prostration  of  the  morals  of  the  people,  of  which  you 
may  discover  within  your  own  territories,  some  examples,  will 
give  you  some,  but  yet  a  faint  idea  of  the  calamity  which  was 
about  to  fall  on  the  country. 

On  the  bank  it  must  have  brought  inevitable  ruin,  for  if  it 
had  failed,  from  its  own  mismanagement,  to  serve  the  great 
purpose  for  which  it  was  just  before  established — that  of  re- 
storing and  preserving  the  soundness  of  the  currency — there 
is  no  doubt  that  the  hostility  which  its  great  and  habitual  pub- 
lic usefulness  cannot  now  appease,  would  have  overwhelmed 
it.  Indeed  it  would  have  had  no  claim  on  the  sympathy  or 
the  justice  of  the  government,  and  would  have  suffered  a 
merited  fate.  No  exertions  and  no  sacrifices  were  therefore  too 
great  to  avert  this  calamity.  It  was  not  to  be  accomplished 
without  sacrifices  :  but  they  have  been  small,  and  infinitely 
less  than  was  expected. 

Thus  stood  the  bank  at  the  organization  of  the  present 
administration.  I  was  elected  and  took  my  seat  as  President 
of  the  board  on  the  6th  March,  1819.  But  some  time  of 
course  was  necessary  to  look  into  the  state  of  the  bank  be- 
fore measures  of  relief  could  be  projected.  Its  danger,  how- 
ever, was  too  manifest,  and  too  pressing  to  allow  much  time 
for  this  purpose.  The  principal  errors  which  produced  the 
danger  were  fortunately  of  easy  discovery,  and  to  them  the 
proper  remedy  was  immediately  applied.  The  southern  and 
western  offices  were  immediately  directed  not  to  issue  their 
notes,  and  the  bank  ceased  to  purchase  and  collect  exchange 
on  the  south  and  west.  A  special  meeting  of  the  board  was 
called,  which  the  non-resident  directors  were  summoned  to 
attend  for  the  9th  April  (the  next  month)  and  a  correspon- 


BANK  OF  THi:    i    \'Ti:i)  STAT;  115 

dence  with  the  secretary  of  the  treasury  was  commenced,  en 
treating  his  forbearance  and  his  aid,  to  which  I  beg  leave  to 
refer.  To  this  officer  I  should  be  ungrateful  and  unjust,  if  I 
were  not  publicly  to  acknowledge  my  obligations  and  those  of 
the  bank,  for  the  countenance  and  support  which  he  afforded 
to  both  in  this  struggle. 

At  the  meeting  of  the  directors  on  the  9th  April,  which  was 
very  full,  the  state  of  the  bank  was  submitted  to  them,  a  se- 
lect committee  appointed,  to  whom  the  subject  of  its  difficul- 
ties was  referred,  and  after  very  mature  deliberation  that  com- 
mittee made  a  report  which  was  unanimously  agreed  to. 
The  principal  means  of  relief  proposed  and  agreed  to  were  : 

1.  To  continue  the  curtailments  previously  ordered.  2. 
To  forbid  the  offices  to  the  south  and  west  to  issue  their  notes 
when  the  exchanges  were  against  them.  3.  To  collect  the 
balances  due  by  local  banks  to  the  offices.  4.  To  claim  of 
the  government  the  time  necessary  to  transfer  funds  from  the 
offices  where  money  was  collected  to  those  where  it  was  to  be 
disbursed,  as  well  as  like  time  (until  the  difficulties  of  the 
bank  were  removed)  to  transfer  funds  to  meet  the  notes  of 
offices  paid  in  the  bank  or  other  offices  than  those  where  they 
were  payable  according  to  their  tenor.  5.  To  pay  deben- 
tures in  the  same  money  in  which  the  duties,  on  which  the 
debentures  were  secured,  had  been  paid.  6.  To  obtain  a 
loan  in  Europe  for  a  sum  not  exceeding  $2,500,000,  for  a 
period  not  exceeding  three  years. 

These  measures,  simple  and  obvious  as  they  are,  and  some 
of  them  so  strangely  overlooked  so  long,  lifted  the  bank  in 
the  short,  space  of  seventy  days  (from  6th  March  to  17th 
May)  from  the  extreme  prostration  which  has  been  described, 
to  a  state  of  safety,  and  even  in  some  degree  of  power,  en- 
abled it  to  cease  its  curtailments,  except  at  points  where  it  had 
an  excess  of  capital,  to  defy  all  attacks  upon  it,  and  to  sustain 
other  institutions  which  wanted  aid  and  were  ascertained  to 
be  solvent ;  above  all,  to  establish  the  soundness  of  the  cur- 
rency which  had  just  before  been  deemed  hopeless ;  and  in 


116  BANK  OF  THE  UNITED  STATES. 

a  single  season  of  business  (the  first)  to  give  to  every  office 
as  much  capital  as  it  could  advantageously  employ.  There 
are  two  of  the  measures  thus  adopted,  on  which  I  will  enter 
into  some  detail,  because  they  have  been  misconceived  and 
misrepresented. 

1.  The  curtailments.  The  immense  curtailments  which 
had  been  made  before  the  present  administration  of  the  bank 
was  organized,  have  been  stated.  The  public  has  been  led 
to  believe  that  these  curtailments  were  made  by  this  adminis- 
tration, and  were  the  fruit  of  a  policy  which  originated  with 
it.  Men  who  sat  at  the  board  and  knew  the  contrary,  or, 
which  is  little  better,  without  taking  the  trouble  to  ascertain  a 
fact  which  was  so  easily  within  their  reach,  have  consented 
to  propagate  this  slander. 

I  now  state,  and  defy  contradiction,  and  am  ready  to  prove 
that  no  curtailment  has  been  ordered  from  the  time  I  took 
my  seat)  until  this  day, 

That  any  curtailments  which  have  been  made  by  the  ad- 
ministration of  which  I  have  been  a  member,  were  made  un- 
der orders  which  I  found  in  force; — that  the  bank  at  Phila- 
delphia continued  to  curtail  only  seventy  days  after  I  took  my 
seat,  that  the  offices  of  New  York  and  Boston  were  only  re- 
quired to  sustain  themselves,  according  to  circumstances,  until 
the  scattered  funds  of  the  institution  could  be  collected  to 
give  them  capital ;  and  further  that  the  greatest  reduction  of 
the  discounts  of  the  bank  itself,  and  all  the  offices  north  of 
Philadelphia,  together,  at  no  one  time  exceeded  $400,000, 
until  they  were  reduced  by  a  want  of  a  demand  for  money 
which  was  general  through  the  nation.  When  this  want  of 
demand  for  money  prevented  the  profitable  employment  of 
the  funds  of  the  bank,  the  only  expedient  to  relieve  it  from 
the  losses  of  unemployed  capital  which  existed,  was  promptly 
and  successfully  employed,  by  purchasing  of  the  government 
of  the  United  States,  first  two  millions  of  six  per  cent,  stock, 
redeemable  at  the  pleasure  of  the  government,  and  afterwards 
four  millions  of  five  per  cent,  stock,  redeemable  in  1835,  on 


BANK  OF  THE  UNITED  STATES.  I  I  T 

terms  which  were  then  deemed  highly-advantageous  to  the 
bank,  and  which  are  so  still,  as  shall  be  hereafter  proved. 

It  is  believed,  that  a  candid  and  dispassionate  investiga- 
tion of  the  facts  will  show,  that,  with  the  same  means,  and 
under  the  same  circumstances,  no  change  of  proceeding  or 
policy  could  have  increased  the  profits  of  the  bank,  and  that, 
if  the  interest  which  has  accrued  on  the  heavy  amount  of 
suspended  debt  and  not  been  received  (and  that  it  has  not 
been  received,  is  not  the  fault  of  the  present  administration, 
which  did  not  grant  the  loans  on  which  the  interest  accrued) 
be  added  to  the  dividends  made,  and  the  accumulations  re- 
served, the  gains  will  be  within  less  than  a  half  per  cent,  per 
annum  of  the  nominal  profits  of  the  preceding  period,  in 
which,  every  thing  was  hazarded,  and  more  actually  lost  than 
all  that  was  thus  nominally  gained.  I  should  have  had  no 
disposition  to  make  these  comparisons  had  they  not  been 
made  necessary  by  false  statements  and  representations  of  the 
same  facts.  In  looking  at  these  results,  let  it  also  be  recol- 
lected what  different  circumstances  characterized  the  different 
periods. 

2.  The  other  measure  which  I  mean  particularly  to  no- 
tice is  the  loan  which  was  obtained  in  Europe.  There  was, 
at  the  time  this  loan  was  projected,  great  embarrassment  in 
all  the  concerns  of  commerce,  but  the  pressing  difficulty  was 
a  real  unsoundness  in  the  bank  circulation,  which  constituted 
the  whole  currency  of  the  countiy.  The  weakness  of  the 
Bank  of  the  United  States  has  been  exposed.  That  of  the 
state  banks  was  probably  greater,  though  they  were  not  sub- 
ject to  so  many,  and  such  complicated  dangers.  The  revenue 
was  accumulating  to  the  credit  of  the  government,  at  various 
points,  in  paper,  that,  if  immediately  pressed  upon  the  banks 
which  issued  it,  would  not  have  not  have  been  honored ;  and 
yet  to  have  discredited  it  suddenly  would  have  forced  the 
crisis  of  the  unsoundness  of  all  the  bank  circulation  at  a  mo- 
ment when  it  had  no  recuperative  faculty,  and  must  have 
ended  in  consequence?  alike  disastrous  to  the  bank  and  th« 


118  BANK  OF  THE  UNITED  STATES. 

country.  On  the  other  hand  to  have  imposed  no  pressure 
upon  these  banks  would  have  been  to  cherish  and  perpetuate 
and  increase  the  evil  of  an  unsound  currency.  The  course 
to  be  pursued  by  this  bank  was  a  subject  of  great  delicacy 
and  difficulty.  The  situation  of  the  country  was  exceedingly 
alarming. 

It  was  not  the  present  evil  that  was  dreaded — the  country 
was,  in  its  money  concerns,  in  an  extreme  state  of  exhaustion. 
It  was  drained  of  its  specie  in  the  preceding  year,  before  the 
first  installment  of  the  Louisiana  stock  became  payable. 
The  sum  necessary  to  make  the  payment  stood  to  the  credit 
of  the  treasury  in  the  bank,  and  was  transferred  to  the  credit 
of  the  holders  of  this  stock.  The  agent  of  Baring,  Brothers, 
&  Co.  had  for  foreign  account,  at  one  moment,  $2,41 0,000 
at  his  credit  at  the  bank  in  Philadelphia,  and  on  the  same 
day  all  the  specie  in  the  bank  and  all  its  offices  did  not 
amount  to  as  much.  It  was  impossible  to  have  paid  it,  and 
the  bank  was  obliged  to  enter  into  a  contract  to  pay  it  in 
England  by  a  given  time,  with  interest.  In  executing  this 
contract,  it  employed  the  whole  operations  of  the  next  season 
of  business  in  foreign  exchange^  and  paid  a  very  large 
amount  of  interest ;  and  at  the  time  this  loan  was  projected, 
there  remained  a  large  balance  lue  to  Baring,  Brothers,  & 
Co.,  on  account  of  this  contract.  The  country  had  been  still 
further  divested  of  its  metallic  basis  in  the  interim,  and  a 
pretense  was  only  wanting  by  too  many  individuals  and 
banking  institutions  to  stop  payment.  To  them  it  might 
have  afforded  immediate  relief  and  profit.  But  to  the  Bank 
of  the  United  States  it  must,  as  already  shown,  have  caused 
inevitable  ruin.  At  every  hazard,  it  was  obliged  to  continue 
its  payments.  Its  ability  to  do  so,  depended  on  sustaining 
the  credit  of  the  country,  and  restoring  the  soundness  of  the 
currency. 

If  its  own  vaults  had  been  better  replenished  than  they 
were,  it  could  not  have  relied  upon  them  alone.  The  ability 
of  this  bank  to  sustain  its  credit,  -at  no  time  depends  solely 


BANK  OF  THE  UNITED  STATES.  119 

or  principally  on  the  specie  in  its  own  vaults,  but  on  the 
general  credit  of  the  country,  sustained  by  the  usual  legal 
and  moral  obligations — destroy  these  practically,  and  all  its 
power  becomes  feebleness.  Thus  it  has,  at  any  given  mo- 
ment, from  twenty  to  thirty  millions  of  dollars  becoming  due 
to  it  within  ninety  days,  besides  very  large  sums  standing  in 
balances  against  other  banks,  and  further  sums  in  the  notes 
of  other  banks.  Now  suppose  at  any  moment  that  a  state 
of  things  should  arise  which  should  destroy  the  general  credit 
of  the  country,  and  disable  debtors,  who  in  their  turn  depend 
on  the  same  means  for  their  ability  to  pay,  to  comply  with 
the  first,  and  tempt  them  to  disregard  the  last  of  these  obli- 
gations, what  would  be  then  the  situation  of  the  Bank  of  the 
United  States  ?  Yet  that  state  of  things  was  on  the  point 
of  taking  place,  when  the  loan  in  question  was  projected. 

The  country  could  bear  no  further  exhaustion,  however 
small,  until  it  had  a  season  to  recover.  But  the  second  in- 
stallment of  the  Louisiana  stock  was  to  be  paid  in  a  few 
months,  and  the  sum  to  be  withdrawn  by  foreigners  exceeded 
probably  all  the  specie  in  the  two  great  cities  of  Philadelphia 
and  New  York.  The  bank  would  have  been  bound  to  pay 
it,  had  it  received  the  local  paper  in  payment  of  the  revenue  ; 
and  if  it  had  refused  it,  we  have  seen  the  disastrous  conse- 
quences to  which  it  would  have  led.  It  was  a  payment 
which  the  country  could  not  at  the  time  bear,  and  the  ability 
of  the  bank  was  necessarily  limited  by  the  ability  of  the  coun- 
try. Hence,  in  a  general  view,  the  necessity  and  expediency 
of  the  loan. 

It  has,  I  understand,  been  said  that  events  have  proved 
that  the  loan  was  unnecessary,  regarding  merely  the  direct 
obligations  of  the  bank.  This  is  an  objection  which  no  mind 
capable  of  comprehending  the  just  policy  of  a  national  bank 
could  make,  if  the  foregoing  views  be  correct.  But  it  is  not 
true.  Events,  on  the  contrary,  proved  it  was  indispensable. 
What  would  the  situation  of  the  bank  have  been,  if  in  Octo- 
ber, 1819,  upwards  of  two  millions  of  dollars  had  been,  in 


120  BANK  OF  THE   UNITED  STATES. 

this  section  of  the  Union,  where  it  was  payable,  drawn  from 
its  vaults  ?  Although  they  had  been  by  that  day  considerably 
strengthened,  yet  all  the  specie  in  the  bank,  and  all  the  offices 
on  this  side  the  Potomac,  could  not  have  met  the  draft ! 
Will  it  be  said  that  the  government  had  not,  at  the  time  this 
installment  was  payable,  a  sufficient  deposit  to  make  the  pay- 
ment ?  It  is  true,  because  the  government,  as  soon  as  it  was 
discovered  that  the  public  credit  would  not  be  made  to  suffer, 
disbursed  the  moneys  which  must  have  been  and  would  have 
been  reserved  for  this  purpose  ;  and  thus  the  bank  and  the 
community  generally  were  relieved  from  the  foreign  drain 
upon  them,  in  the  manner  in  which  the  relief  was  originally 
projected. 

Again — the  burden  of  this  loan  has  been  greatly  misre- 
presented. It  has  been  supposed  that  in  consequence  of  the 
subsequent  want  of  demand  for  money,  which  prevented  the 
bank  from  fully  employing  its  capital,  the  interest  paid  on 
this  loan  was  a  loss  to  the  bank.  This  might  be  admitted, 
and  still  the  loan  was  not  the  less  necessary.  A  sacrifice  of 
gain  was  expected  and  intended.  But  the  fact  is  not  so. 
Although  undoubtedly  there  was  a  long  period  during  which 
the  capital  of  the  bank  was  not  fully  employed,  yet  it  so  hap- 
pened that  the  specific  money  derived  from  this  loan  was  em- 
ployed, and  has  not  ceased  to  bring  in  six  per  cent,  per  annum 
from  that  day  to  this.  Without  it  the  bank  could  not  have 
taken  the  government  loan  of  two  millions  of  dollars,  in  1820, 
which  remains  yet  unpaid  ;  nor  could  it  have  done  the  pro- 
fitable business  in  foreign  exchanges  which  it  did  in  that 
year,  nor  have  distributed  capitals  as  early  as  it  did  to  the 
northern  offices,  which  infused  into  them  a  new  life  ;  nor 
could  it  have  sustained  the  character  or  the  usefulness  of  a 
national  bank,  until  it  should  have  collected  by  slow  and 
painful  means  its  scattered  capital.  I  have  said  so  much  of 
the  loan,  not  only  because  it  is  an  important  circumstance  in 
the  management  of  the  bank,  but  also  because  it  is  a  measure 
closely  connected  with  the  financial  history  of  the  country. 


tJAMi  OF  THE   UMTED  STATES. 

anu1  on  which  turned,  in  a  great  measure,  the  preservation  of 
a  sound  currency  ;  an  event,  however  unusual  it  is  so  to  con- 
sider it,  probably  of  more  importance  than  any  other  in  the 
history  of  the  country  since  the  late  peace.  In  sustaining 
the  bank  a  great  public  purpose  was  served,  but  it  cost  not 
an  additional  cent.  Censured  though  it  may  be,  I  proudly 
say  I  suggested  and  advised  this  measure,  and  am  well  con- 
tent to  bear  the  responsibility  of  it.  The  loan  was  for  only 
t,wo  millions  of  dollars,  and  was  payable  on  the  5th  of  July 
last.  One  million  thereof  has  been  continued  at  5  per  cent, 
interest,  and  the  other  has  been  paid  off  at  a  profit  which 
would  defray  the  charge  of  remitting  the  remaining  million 
even  at  the  present  adverse  rate  of  exchange. 

During  the  present  administration  of  the  bank,  const- 
derable  sums  have  been  drawn  from  the  capital,  in  erecting 
necessary  buildings  for  the  use  of  the  institution  :  considerable 
burdens  which  were  previously  created  have  been  discharged ; 
one  million  of  dollars  have  been  paid  on  account  of  the  bonus 
to  the  government  for  the  charter  ;  six  millions  of  funded  debt 
have  been  purchased,  and  are  now  held  by  the  bank  ;  three 
millions  five  hundred  and  fifty  thousand  dollars  have  been 
accumulated  for  the  purpose  of  repairing  the  losses  which  had 
been  previously  sustained,  and  there  now  stands  to  the  credit 
of  profit  and  loss  the  sum  of  $245,796.7  ;  and  there  is  due  to 
the  bank  $1,279,520.54,  for  interest  which  accrued  before 
the  first  of  July  last,  on  suspended  debts,  and  which  has  not 
been  received. 

The  losses  of  the  institution  were  estimated,  at  the  last 
meeting  of  the  stockholders,  at  three  millions  of  dollars. 
They  have  been  found  to  exceed  that  sum.  The  estimates 
of  the  dividend  committee,  in  July  last,  made  the  aggregate 
of  the  losses  $3,743,899.  This  includes  all  losses  to  that, 
time,  from  whatever  cause.  A  very  small  portion  of  these 
lossess,  you  will  discover,  has  resulted  from  the  business  or 
management  posterior  to  March,  1819.  It  is  hoped,  from  the 
lapse  of  time  and  the  trying  circumstances  which  have  inter 

ffi 


122  BANK  OF  THE  UNITED  STATES. 

vened,  that  the  losses  have  reached  their  utmost  amount. 
The  greatest  pains  have  been  taken  to  probe  the  state  of  all 
the  offices  to  the  bottom,  as  the  accompanying  documents 
will  show. 

The  western  debts,  by  which  are  meant  those  due  in  the 
states  of  Ohio  and  Kentucky,  have  been  a  subject  of  peculiar 
anxiety  and  attention.  To  ascertain  the  exact  state  of  them,, 
the  board  were  not  satisfied  to  rely  on  the  ordinary  means, 
but  dispatched  the  cashier  of  the  bank,  who  was  understood 
to  be  particularly  well  acquainted  with  these  states,  to  look 
into  the  situation  of  the  offices  in  Kentucky  and  Ohio,  and  to 
furnish  an  estimate  of  the  probable  loss  which  would  be  sus- 
tained upon  them.  His  reports  which  accompany  this  com- 
munication, will  exhibit  these  results.  His  estimates  very  far 
exceed  those  of  the  committees  of  the  offices  ;  and  the  parent 
board  and  the  committees  of  that  board  have  been  governed 
by  his  estimates,  in  forming  their  opinions  of  the  amount  of 
these  losses.  A  number  of  investigations  of  particular  cases 
have,  in  the  course  of  the  current  transactions  of  the  bank, 
taken  place,  and,  on  all  such  occasions,  his  estimates  of  loss 
have  appeared  to  be  beyond  the  probable  loss,  with  the  ex- 
ception of  the  cases  of  some  local  banks  at  Cincinnati.  Doubts, 
however,  of  the  sufficiency  of  these  estimates,  founded  on  the 
fear  of  the  fraudulent  disposition  of  some  of  the  debtors,  and 
the  unjust  laws  of  those  states  in  relation  to  creditors,  were 
excited — the  board,  therefore,  in  July,  1821,  set  apart  as  an 
auxiliary  fund,  in  addition  to  the  contingent  fund  of  three 
millions  five  hundred  and  fifty  f  thousand  dollars,  all  excess 
over  the  par  value  of  certain  stock  pledged  and  transferred  to 
the  bank,  and  all  interest  due  and  to  grow  due  on  the  sus- 
pended debts  at  the  offices  in  Kentucky  and  Ohio,  to  be  with 
the  said  "  contingent  fund"  inviolably  appropriated  to  the  ex- 
tinguishment of  the  losses  of  the  bank,  unless  otherwise  or- 
dered or  advised  by  the  stockholders  at  a  triennial  meeting, 
or  at  a  regular  meeting  which  should  be  called  for  the  pur- 
pose. 


BANK  OF  Till,   i    \i  LED  STATES. 

The  course  of  policy  pursued  by  the  board  in  relation  to 
suspended  debts,  and  particularly  the  debts  due  in  the  west- 
ern states,  was  not  to  press  the  debtors  rigorously  where  they 
were  willing  to  give  the  best  security  in  their  power,  and  in- 
deed never  to  press  them  except  with  a  view  to  security.  The 
most  liberal  indulgence  therefore  has  invariably  been  granted 
where  satisfactory  security  or  the  best  in  the  power  of  the 
debtor  has  been  given.  On  the  1st  April,  1819,  the  sum  due 
to  the  bank  in  Ohio  and  Kentucky,  including  balances  due 
by  local  banks,  was  $6,351,120.80  ;  on  the  30th  August, 
1822,  the  sum  due,  including  also  real  estate  taken  in  pay- 
ment, was  $5,389,477.18,  being  a  reduction  of  $961,653.62," 
but  in  the  debt  now  due,  is  a  considerable  sum  of  contingent 
interest  which  has  been  liquidated  and  notes  taken  for  it,  so 
that  the  reduction  will  exceed  one  million  of  dollars  of  the 
principal.  Mortgages,  and  other  collateral  security,  deemed 
ample,  have  in  many  cases  been  obtained,  in  others  valuable 
additional  security,  in  others  judgments,  and  suits  are  pend- 
ing in  all,  or  nearly  all  cases  in  which  security  has  not  been 
obtained. 

The  office  at  Cincinnati  was  discontinued  in  September, 
1820,  and  a  confidential  agent  is  now  employed  in  winding 
up  its  affairs.  The  reasons  for  discontinuing  this  office  it 
would  be  tedious,  and  perhaps  invidious  to  narrate,  they  shall 
be  stated  to  any  committee  you  may  appoint.  It  has  been 
deemed  inexpedient  to  discontinue  any  other  office. 

The  several  funds  which  may  be  relied  upon  to  extinguish 
the  estimated  losses  are  the  following :  1 .  A  contingent  fund  of 
actual  profits  which  have  been  reserved  of  three  millions  five 
hundred  and  fifty  thousand  dollars.  2.  Any  excess  beyond 
the  par  value  of  37,954  shares  of  the  capital  stock  of  the 
bank,  pledged  to  it,  and  standing  in  its  corporate  name  on 
the  books.  Though  the  debts  secured  by  these  shares  are 
only  estimated  at  par,  they  give  a  claim  to  the  bank  which 
will  cover  any  value  beyond  par  which  the  shares  may  here- 

*  Vide  monthly  statements  for  1st  April,  1819,  and  30th  August,  1822. 


J24 


BANK  OF  THE  UN J  TED  STATES; . 


after  bear.  3.  The  sum  of  $245,796.7,  now  standing  to  the 
credit  of  profit  and  loss.  4.  The  sum  of  $1.279,520.54,  ar- 
rears of  interest  due  the  bank.  It  must  be  remarked  that 
this  last  sum  includes  interest  a*  well  on  debts  estimated  as 
bad  and  doubtful  as  on  those  deemed  good.  There  is  now  no 
charge  on  the  bank  besides  ordinary  current  charges,  except 
$60,000  dollars  semi-annually,  which  will,  if  applied  for  the 
duration  of  the  charter,  extinguish  the  bonus,  the  premium 
on  the  five  per  cent,  loan,  and  about  forty  per  cent,  of  the 
cost  of  banking  houses  which  have  been  erected,  and  of  any 
that  in  all  likelihood  will  be  hereafter  erected,  as  well  as  the  com- 
pletion of  the  building  in  which  you  are  assembled  ;  and  al- 
though I  have  been  opposed,  and  haye  even  entered  my  dis- 
sent upon  the  journals,  to  some  of  the  acts  of  the  board  in  re- 
lation to  this  building,  I  nevertheless  do  advise,  as  it  is  so  near 
completion,  and  is  so  beautiful  a  specimen  of  architecture, 
that  it  be  finished.  It  never  again  can  be  done  at  so  small 
an  expense,  and  never  under  the  superintendence  of  an 
agent  more  skillful,  faithful,  economical,  and  accurate,  than 
the  gentleman  who  planned  and  has  so  far  executed  it.  The 
additional  expense  will  be  small. 

It  was  expected  by  the  stockholders  at  their  last  meeting, 
that  the  bank  would  have  been  enabled  to  have  repaired  the 
losses  which  had  been  sustained,  and  to  have  made  a  dividend 
in  January,  1820.  This  the  increased  estimates  of  the 
losses  and  the  stagnation  of  trade  concurred  to  prevent,  while 
the  same  causes  have  diminished  the  amount  of  the  dividends 
which  have  since  been  made.  It  will  be  seen,  however,  on 
reference  to  the  accompanying  statement,  that  the  bank 
would  have  been  able  to  have  made  dividends  which  would, 
no  doubt,  have  been  satisfactory  to  the  stockholders  during 
the  whole  period  of  this  administration,  had  it  not  been  in- 
cumbered  as  well  with  the  losses  as  the  various  embarrass- 
ments which  belonged,  in  their  origin,  to  a  previous  period. 

The  expenses  of  the  institution  very  soon  attracted  the  at- 
tention of  the  present  administration,  but  it  ;  wn«  not  practica- 


I3AJSK  UF  THE  UNlTliJJ  STATIC. 

bic  to  reduce  them  immediately.  An  accompanying  state- 
ment, however,  will  show  that  much  has  been  done  towards 
the  accomplishment  of  this  object.  The  amount  is  still  enor- 
mous compared  with  the  profits  growing  out  of  the  proper 
operations  of  banking  ;  that  is  to  say  the  profits  of  the  bank, 
exclusive  of  the  dividends  received  on  the  funded  debt  which 
it  holds,  and  which  require  no  management  or  expense  in  the 
receipt  of  them. 

The  monthly  statements  of  the  bank  exhibit  an  analysis 
of  the  state  and  current  business  of  the  bank,  and  the  seve- 
ral offices,  as  perfect  as  the  nature  of  the  subjects  will  permit : 
but  if  taken  without  explanations  they  are  often  likely  to 
mislead.  No  attempt  at  this  time  and  in  this  form  to  give 
such  explanations  in  a  general  way  would  be  admissible  or 
practicable,  but  all  such  will  be  cheerfully  and  promptly 
given  in  reply  to  every  inquiry  on  particular  points  which 
may  be  presented. 

You  will  probably  desire  to  have  some  notices  of  the  con- 
dition of  the  principal  funds  in  which  the  capital  is  invested. 
This  I  will  briefly  attempt : 

I.  The   discounted  paper.      The    current  paper  of  this 
bank  and  its  offices  is  probably  as  good,  or  better,  than  the 
current  paper  of  other  banks,  in  the  places  respectively  where 
it  is  due.     There  is,  however,  unfortunately  a  heavy  mass  of 
suspended  paper,  on  which  interest  is  continually  accruing,  a 
great  part  of  which  will,  no  doubt,  in  time  be  recovered,  but 
which  adds  little  or  nothing  at  the  present  time,  to  the  fund 
from  which  the  bank  is  to  divide.      There  is  one  portion  of 
this  which,  independently  of  the  losses  already  sustained  by  it 
and  which  are  included  in  the  estimates,  I  consider  as  very 
good  and  productive.     I  mean  the  forfeited  stock,  consisting 
of  37,954  shares  which  may  be  considered  as  a  reduction  of 
a  capital  quite  too  large,  to  the  extent  of  their  par  value. 

II.  The  funded  debt  held  by  the  bank.      This  now  con- 
sists, with  the  exception  of  a  very  inconsiderable  sum,  of 
seven  millions  of  five  per  cent,  stock  subscribed  by  the  go- 


12(5  BANK  OF  THE  UNITED  STATES. 

vernment ;  of  two  millions  of  six  per  cent,  stock  purchased 
in  1820,  redeemable  at  the  pleasure  of  the  government ;  of 
four  millions  of  five  per  cent,  stock  purchased  in  1821,  and 
redeemable  on  the  31st  of  December,  1835.  The  two  mil- 
lions of  six  per  cent,  stock,  of  the  loan  of  1820,  will,  in  all 
likelihood,  be  speedily  redeemed.  The  four  millions  of  five 
per  cents,  are  longer  irredeemable  than  any  other  stock  of 
the  government  of  the  United  States,  and  hence  probably, 
this  stock  is  more  valuable  than  other  stock  of  the  govern- 
ment of  the  United  States.  It  is  quoted  higher  in  the  Lon- 
don market  than  the  average  of  the  six  per  cent,  stocks. 
When  the  bank  obtained  this  stock  it  was  deemed  a  great 
bargain.  It  is  now  unusually  depressed,  from  causes  which 
probably  cannot  be  permanent,  and  some  stockholders  who 
urged  the  bank  to  endeavor  to  take  it  at  any  price,  begin  now 
to  doubt  whether  the  institution  were  not  better  without  it.  If 
it  were  now  sold  at  a  profitable  rate,  as  it  may  be,  the  same 
persons,  if  it  rise,  would  condemn  the  sale  of  it.  Leaving 
these  persons  then  tc  th  indulgence  of  their  opinions,  it  may 
be  remarked  that  the  more  the  bank  can  retain  of  this  stock 
the  better  for  the  institution.  It  wants  active  funds  but  for 
two  purposes  :  Firstly,  to  pay  the  loan  of  $1,000,000,  due  in 
London.  And,  secondly,  to  give  additional  capital  to  its 
offices.  All  the  offices  south  of  Philadelphia,  I  venture  to 
say,  have  as  much  capital  as  they  can  use  advantageously. 

I  cannot  stop  to  give  my  reasons  for  this  opinion.  It  is 
doubtful  whether  more  than  half  a  million  in  addition  to  its 
present  funds  could  be  profitably  employed  at  the  parent 
Dank :  more  than  an  additional  million  I  am  satisfied,  cannot, 
under  any  circumstances,  be  profitably  employed  at  New 
York,  (a  great  many  crude  suggestions  to  the  contrary  not- 
withstanding :)  and  I  doubt  whether  at  this  moment  a  dollar 
more  ought  to  be  added ;  though  I  am  of  opinion  that  a  mil- 
lion ought  to  be  added  to  the  capital  of  that  office  at  a  proper 
time,  making  the  capital  $2,500,000  dollars.  Half  a  million 
ndded  to  the  capital  of  the  office  at  Boston,  making  the  capi- 


JJAMv  OF  THE    UAITi-ID   siTATKfc'.  1^ 

ml  $1,500,000  dollars,  will  be  enough  for  that  office.  All 
this  will  be  supplied  by  the  redemption  of  the  two  millions  (> 
per  cent,  loan,  and  if  a  little  more  be  necessary,  it  will  soon 
be  supplied  from  the  suspended  debt.  I  think,  therefore,  if 
the  bank  find  it  necessary  to  part  with  a  million  and  a  half  of 
this  loan,  it  ought  to  do  it  with  regret ;  but  it  should  on  no 
account  part  with  more.  The  unextinguished  part  of  the 
premium  of  this  loan  is  about  4|  per  cent.,  and  the  last  Lon- 
don quotations  are  95  a  96,  and  the  exchange  in  favor  of  Lon- 
don 10  to  10|-  per  cent.  It  is  obvious,  therefore,  that  at  the 
lowest  quotations  now  or  at  any  other  time,  of  this  stock,  it 
would  realize  the  cost,  in  connection  with  the  rate  of  ex- 
change, the  rise  of  which  against  this  country,  is  supposed  to 
be  the  principal  cause  of  the  depression  of  this  stock.  There 
is  one  error  in  relation  to  this  subject  which  it  may  be  worth 
explaining.  It  is  supposed  by  some,  that,  because  the  go- 
vernment of  the  United  States  have  not  been  enabled  to 
convert  their  six  per  cent,  stocks  into  fives,  that  a  five  per 
cent,  stock  is  deemed  undesirable  abroad :  but  the  govern- 
ment has  never  offered  a  stock  like  that  which  the  bank 
holds  in  exchange  for  the  sixes.  It  has  offered  a  stock  re- 
deemable in  eight  or  ten  years.  The  stock  held  by  the  bank 
is  not  redeemable  in  less  than  thirteen  years  and  three 
months.  No  stronger  proof  can  be  given  that  the  sixes 
would  be  exchanged  for  such  a  stock,  than  the  fact  that  it  is 
quoted  higher  than  the  average  of  the  six  per  cents,  in  the 
London  market. 

The  bank,  by  a  resolution  of  the  28th  day  of  November. 
1816,  agreed  to  remit  to  the  holders  of  the  capital  stock  of  the 
Bank,  residing  in  Europe,  the  dividends  which  should  be  de- 
clared thereon,  free  of  expense.  This  was  deemed  a  very 
disadvantageous  and  burthensome  engagement  on  the  part 
of  the  Bank — advice  of  eminent  counsel  has  been  taken,  to 
know  whether  the  bank  was  bound  to  continue  these  remit- 
tances, and  it  has  been  advised  that  it  was  not  bound  longer 
than  it  should  desire  to  do  so  from  its  own  views  of  expediency  ov 


126  BANK  OF  TliE  UNITED 

advantage.  It  was  determined  therefore  to  discontinue  this 
agency  except  as  to  those  who  had  made  regular  requisi- 
tions, or  who  should  do  so  by  a  given  day.  As  to  these  it 
was  thought  better  that  the  bank  should  make  the  sacrifice 
which  these  remittances  required,  than  incur  the  suspicion 
of  having  misled  th  >  holders  of  stock  who  had  made  the  re 
quisition,  perhaps,  under  the  impression,  that  the  regulation 
was  not  disadvantageous  to  the  bank,  and  that  it  would  be 
permanent ;  as  to  all  others  there  was  no  pretence  of  claim. 
There  is  one  case  of  3540  shares  which  is  under  considera 
tion,  which  the  bank  has  heretofore  determined  not  to  be  en- 
titled to  this  privilege,  but  the  parties  have  urged  a  reconside- 
ration of  it.  If  this  be  embraced,  the  number  of  shares  on 
which  the  bank  has  determined  to  continue  remittances  will 
be  15,330  shares.  If  they  be  excluded,  the  number  will  be 
11,790  shares. 

With  these  facts,  and  an  inspection  of  the  documents 
which  are  referred  to,  and  ready  to  be  exhibited,  the  stock- 
holders will  be  able  to  form  an  opinion  for  themselves,  with 
all  the  lights  and  information  which  I  have,  or  of  which  the 
subject  is  susceptible,  of  the  state  of  the  bank,  and  may  offer 
their  advice  and  express  their  opinions  accordingly. 

LANGDON  CHEVES, 

President  of  the  Bank  of  the  United  States. 

"Bank  United  States,  Sept.  25, 1822. 

•'•  The  committee  of  inspection  and  investigation  appointed 
in  pursuance  of  a  resolution  adopted  at  the  meeting  of  the 
stockholders,  met  agreeably  to  adjournment.  Mr.  Cheves 
continued  the  proof  of  his  statements,  and  closed  at  12 — 
when,  on  motion  of  Mr.  Hamilton,  the  following  resolution 
was  unanimously  adopted  : 

"  Resolved,  That,  in  the  opinion  of  this  committee,  Mr. 
Cheves  has  fully  and  satisfactorily  proved  the  facts  detailed 
in  his  statement  of  the  past  and  present  condition  of  the 


BANK  OF  THE   UNITED  STATES. 

bank,  submitted  by  him  to  the  stockholders,  on  the  2d  Sep- 
tember, and  now  in  the  possession  of  this  committee." 

I  do  hereby  certify  that  the  above  is  a  correct  extract  from 
the  minutes  of  the  committee  of  stockholders  of  the  bank  of 
the  United  States,  signed  by  the  chairman  and  secretary,  and 
deposited  in  this  bank  for  safe  keeping. 

J.  ANDREWS,  Assistant  Cashier. 

Bank  United  States,  October  17,  1822. 


M^DUFFIE'S    REPORT. 

House  of  Representatives,  April  13,  1830. 
Mr.  M'Duffie,  from  the  Committee  of  Ways  and  Means,  to  which  the 
subject  had  been  referred,  made  the  following 

REPORT : 

The  Committee  of  Ways  and  Means,  to  whom  was  re- 
ferred so  much  of  the  message  of  the  president  as  re- 
lates to  the  Bank  of  the  United  States,  beg  leave  to  rr 
port  : 

That  they  have  bestowed  upon  the  subject  all  the  atten- 
tion demanded  by  its  intrinsic  importance,  and  now  respect- 
fully submit  the  result  of  their  deliberations  to  the  considera- 
tion of  the  house.  There  are  few  subjects,  having  reference 
to  the  policy  of  an  established  government,  so  vitally  connected 
with  the  health  of  the  body  politic,  or  in  which  the  pecuniary 
interests  of  society  are  so  extensively  and  deeply  involved. 
No  one  of  the  attributes  of  sovereignty  carries  with  it  a  more 
solemn  responsibility,  or  calls  in  requisition  a  higher  degree 
of  wisdom,  than  the  power  of  regulating  the  common  cur- 
rency, and  thus  fixing  the  general  standard  of  value  for  a 
great  commercial  community,  composed  of  confederated 

17 


130  BANK  OF  THE  UNITED  STATE*?. 

Such  being,  in  the  opinion  of  the  committee,  the  high  and 
delicate  trust  exclusively  committed  to  congress  by  the  con- 
stitution, they  have  proceeded  to  discharge  the  duty  assigned 
to  them  with  a  corresponding  sense  of  its  magnitude  and 
difficulty. 

The  most  simple  and  obvious  analysis  of  the  subject,  as  it 
is  presented  by  the  message  of  the  president,  exhibits  the 
following  questions  for  the  decision  of  the  national  legislature : 

1.  Has  congress  the  constitutional  power  to  incorporate  a 
bank,  such  as  that  of  the  United  States  1- 

2.  Is  it  expedient  to  establish  and  maintain  such  an  insti- 
tution 1 

3.  Is  it  expedient  to  establish  a  "  national  bank,  founded 
upon  the  credit  of  the  government  and  its  revenues  ?" 

I.  If  the  concurrence  of  all  the  departments  of  the  govern- 
ment, at  different  periods  of  our  history,  under  every  admi- 
nistration, and  during  the  ascendancy  of  both  the  great  po- 
litical parties  into  which  the  country  was  divided,  soon  after 
the  adoption  of  the  present  constitution,  shall  be  regarded  as 
having  the  authority  ascribed  to  such  sanctions  by  the  com- 
mon consent  of  all  well  regulated  communities,  the  consti- 
tutional power  of  congress  to  incorporate  a  bank,  may  be  as- 
sumed as  a  postulate  no  longer  open  to  controversy.  In  a 
little  more  than  two  years  after  the  government  went  into 
operation,  and  at  a  period  when  most  of  the  distinguished 
members  of  the  federal  convention  were  either  in  the  executive 
or  legislative  councils,  the  act  incorporating  the  first  bank 
of  the  United  States  passed  both  branches  of  congress,  by 
large  majorities,  and  received  the  deliberate  sanction  of  Pre- 
sident Washington,  who  had  then  recently  presided  over  the 
deliberations  of  the  convention.  The  constitutional  power  of 
congress  to  pass  the  act  of  incorporation  was  thoroughly  in- 
vestigated, both  in  the  executive  cabinet  and  in  congress, 
under  circumstances  in  all  respects  propitious  to  a  dispas- 
sionate decision.  There  was  at  that  time  no  organization  of 
political  parties,  and  the  question  was,  therefore,  decided  .by 


I'.ANK  OP  THE  UNITED  STAT  i  131 

iliose  who,  from  their  knowledge  and  experience,  were  pecu- 
liarly qualified  to  decide  correctly;  and  who  were  entirely 
free  from  the  influence  of  that  party  excitement  and  prejudice 
which  would  justly  impair,  in  the  estimation  of  posterity,  the 
authority  of  a  legislative  interpretation  of  the  constitutional 
charter.  No  persons  can  he  more  competent  to  give  a  just 
construction  to  the  constitution,  than  those  who  had  a  prin- 
cipal agency  in  framing  it ;  and  no  administration  can  claim 
a  more  perfect  exemption  from  all  those  influences  which 
sometimes  pervert  the  judgments  even  of  the  most  wise  and 
patriotic,  than  that  of  the  father  of  his  country,  during  the  firs! 
term  of  his  service. 

Such  were  the  circumstances  under  which  all  the  branches 
of  the  national  legislature  solemnly  determined  that  the  power 
of  creating  a  national  bank  was  vested  in  congress,  by  the  con- 
stitution. The  bank,  thus  created,  continued  its  operations 
for  twenty  years — the  period  for  which  its  charter  was  granted 
— during  which  time,  public  and  private  credit  were  raised 
from  a  prostrate  to  a  very  elevated  condition,  and  the  finances 
of  the  nation  were  placed  upon  the  most  solid  foundation. 

When  the  charter  expired  in  1811,  congress  refused  to 
renew  it,  principally  owing,  as  the  committe  believe,  to  the 
then  existing  state  of  political  parties.  Soon  after  the  bank 
was  chartered,  the  two  great  parties  that  have  since  divided 
the  country  began  to  assume  an  organized  existence.  Mr. 
Jefferson  and  Mr.  Madison,  the  former  in  the  executive  ca- 
binet, and  the  latter  in  congress,  had  been  opposed  to  the 
establishment  of  the  bank,  on  constitutional  grounds,  and 
being  placed  at  the  head  of  the  party  most  favorable  to  the 
extension  of  the  powers  of  the  government,  by  implication, 
the  bank  question  came  to  be  regarded  as,  in  some  degree, 
the  test  of  political  principle. 

When  Mr.  Jefferson  came  into  power  upon  the  strong  tide 
of  a  great  political  revolution,  the  odium  of  the  alien  and  se- 
dition laws,  was,  in  part,  communicated  to  the  Bank  of  the 
United  States  ;    and  although  he   gave   his  official   sane 
tion  to  an  net  creating  a  new  branch  of  that  institution  at 


BANK  OF  THE  UNITED  STATES. 

New  Orleans,  and  to  another  to  punish  the  counterfeiting  of 
its  bills,  yet  when  the  question  of  renewing  the  charter  came 
before  congress,  it  was  discussed  as  a  party  question.  And 
though  some  of  the  most  distinguished  republicans,  including 
Mr.  Gallatin,  then  secretary  of  the  treasury,  and  Mr.  Craw- 
ford, then  a  member  of  the  senate,  were  decidedly  in  favor  of 
the  renewal,  sustaining  the  measure  by  able  arguments,  the 
votes  in  both  branches  of  congress  were  distinctly  marked  as 
party  votes.  At  no  time,  since  the  commencement  of  the 
government,  has  there  existed  a  more  violent  party  excite- 
ment, than  that  which  marked  the  period  under  review.  It 
was  the  period  of  the  embargo,  non-intercourse,  and  other 
commercial  restrictions  ;  when  the  undiscriminating  opposi- 
tion of  the  leaders  of  the  federal  party  to  the  measures  adopted 
by  the  administration,  to  vindicate  our  rights  against  British 
aggression,  had  caused  the  great  majority  of  the  American 
people  to  view  these  leaders  as  the  apologists  of  a  nation, 
already  regarded  in  the  light  of  a  public  enemy.  When  to 
these  circumstances  we  add,  that  the  stock  of  the  bank  was 
principally  held  by  British  subjects,  and  Americans  of  the  un- 
popular party,  the  house  will  readily  perceive  how  great  were 
the  national  and  party  prejudices,  which  must  have  been  ar- 
rayed against  the  proposition  to  renew  its  charter.  It  was 
stated  by  Mr.  Clay,  in  a  speech  delivered  in  the  senate,  that 
seven-tenths  of  the  stock  belonged  to  British  subjects,  and 
that  certain  English  noblemen,  and  a  late  lord  chancellor, 
were  among  the  very  largest  of  the  stockholders.  With  all 
these  difficulties  to  encounter,  the  proposition  for  renewing  the 
charter  was  lost  only  by  the  casting  vote  of  the  president  of 
I  lie  senate,  and  by  a  majority  of  a  single  vote  in  the  house  of 
representatives . 

In  less  than  three  years  after  the  expiration  of  the  charter — 
the  war  with  Great  Britain  having  taken  place  in  the  mean 
time— the  circulating  medium  became  so  disordered,  the  pub- 
lic finances  so  deranged,  and  the  public  credit  so  impaired, 
vhat  the  enlightened  patriot.  Mr.  Dallas,  who  then  presided 


UAA'K  <•!.••   TJIE    l.NJTKJj   .VJ'ATK.^.  133 


over  the  treasury  department,  witli  the  sanction  of  Mr.  Madi- 
son, and,  as  it  is  believed,  every  member  of  the  cabinet,  re- 
commended to  congress  the  establishment  of  a  National 
Bank,  as  the  only  measure  by  which  the  public  credit  could 
be  revived,  and  the  fiscal  resources  of  the  government  re- 
deemed from  a  ruinous,  and  otherwise  incurable  embarrass- 
ment ;  and  such  had  been  the  impressive  lesson  taught  by  a 
very  brief,  but  fatal  experience,  that  the  very  institution. 
which  had  been  so  recently  denounced,  and  rejected  by  the 
republican  party,  being  now  recommended  by  a  republican 
administration,  was  carried  through  both  branches  of  con- 
gress, as  a  republican  measure,  by  an  overwhelming  majori- 
ty of  the  republican  party.  It  is  true  that  Mr.  Madison  did 
not  approve  and  sign  the  bill  which  passed  the  two  houses. 
because  it  was  not  such  a  bill  as  had  been  recommended  by 
the  secretary  of  the  treasury,  and  because  the  bank  it  pro- 
posed to  create,  was  not  calculated,  in  the  opinion  of  the  pre- 
sident, to  relieve  the  necessities  of  the  country.  But  he  pre- 
mised his  objections  to  the  measure,  by  "  waiving  the  ques- 
tion of  the  constitutional  authority  of  the  legislature  to  estab- 
lish an  incorporated  bank,  as  being  precluded,  in  his  opinion. 
by  repeated  recognitions,  under  varied  circumstances,  of  the 
validity  of  such  an  institution  in  acts  of  the  legislative. 
executive,  and  judicial  branches  of  the  government,  accom- 
panied by  indications,  in  different  modes,  of  a  concurrence  of 
the  general  will  of  the  nation."  Another  bill  was  immedi- 
ately introduced,  and  would,  in  all  probability,  have  become  a 
law,  had  not  the  news  of  peace,  by  doing  away  the  pressure 
of  the  emergency,  induced  congress  to  suspend  further  pro- 
ceedings on  the  subject,  until  the  ensuing  session.  At  the 
commencement  of  that  session,  Mr.  Madison  invited  the  at- 
tention of  congress  to  the  subject  ;  and  Mr.  Dallas  again 
urged  the  necessity  of  establishing  a  bank  to  restore  the  cur- 
rency, and  facilitate  the  collection  arid  disbursement  of  the 
public  revenue  ;  and  so  deep  and  solemn  was  the  conviction 
upon  the.  minds  of  the  public  functionaries,  that  such  an  in- 


134  BAN£  OP  THE  UNITED  STATES. 

stitution  was  the  only  practicable  means  of  restoring  the  cir- 
culating medium  to  a  state  of  soundness,  that,  notwithstand- 
ing the  decided  opposition  of  all  the  state  banks  and  their 
debtors,  and  indeed,  the  whole  debtor  class  of  the  communi- 
ty, the  act,  incorporating  the  present  Bank  of  the  United 
States,  was  passed  by  considerable  majorities  in  both  branches 
of  congress,  and  approved  by  Mr.  Madison. 

The  brief  history  of  the  farmer  and  present  bank,  forci- 
bly suggests  a  few  practical  reflections.  It  is  to  be  remarked, 
in  the  first  place,  that,  since  the  adoption  of  the  constitution, 
a  bank  has  existed  under  the  authority  of  the  federal  govern- 
ment, for  thirty-three  out  of  forty  years,  during  which  time,, 
public  and  private  credit  ha've  been  maintained  at  an  eleva- 
tion fully  equal  to  what  has  existed  in  any  nation  in  the 
world :  whereas,  in  the  two  short  intervals,  during  which  no 
national  bank  existed,  public  and  private  credit  were  greatly 
impaired,  and  in  the  latter  instance,  the  fiscal  operations  of 
the  government  were  almost  entirely  arrested.  In  the  second 
place,  it  is  worthy  of  special  notice,  that,  in  both  the  in- 
stances in  which  congress  has  created  a  bank,  it  has  been 
done  under  circumstances  calculated  to  give  the  highest  au- 
thority to  the  decision.  The  first  instance,  as  has  been  al- 
ready remarked,  was  in  the  primitive  days  of  the  republic, 
when  the  patriots  of  the  revolution,  and  the  sages  of  the  fe- 
deral convention,  were  the  leading  members  both  of  the  ex- 
ecutive and  legislative  councils ;  and  when  General  Wash- 
ington, who,  at  the  head  of  her  armies,  had  conducted  his 
country  to  independence,  and,  as  the  head  of  the  convention, 
had  presided  over  those  deliberations  which  resulted  in  the 
establishment  of  the  present  constitution,  was  the  acknow- 
ledged president  of  a  people,  undistracted  by  party  divisions. 
The  second  instance  was  under  circumstances  of  a  very  dif- 
ferent, but  equally  decisive  character.  We  find  the  very 
party  which  had  so  recently  defeated  the  proposition  to  renew 
the  charter  of  the  old  bank,  severely  schooled  both  by  ad- 
versity and  experience,  magnanimously  sacrificing  the  pride 


BANK  OF  THE   UxVli^U  sSTAT  ! 


ui  consistency,  and  the  prejudices  of  party,  at  the  shrine  of 
patriotism.  It  may  be  said,  without  disparagement,  that  an 
assembly  of  higher  talent  and  purer  patriotism  has  never  ex- 
isted since  the  days  of  the  revolution,  than  the  congress  by 
which  the  present  bank  was  incorporated.  If  ever  a  politi- 
cal party  existed,  of  which  it  might  be  truly  said,  that  "  all 
the  ends  they  aimed  were  their  country's,"  it  was  the  repub- 
lican party  of  that  day.  They  had  just  conducted  the  coun- 
try through  the  perils  of  a  war,  waged  in  defense  of  her 
rights  and  honor  ;  and,  elevating  their  views  far  above  the 
narow  and  miserable  ends  of  party  strife,  sought  only  to  ad- 
vance the  permanent  happiness  of  the  people.  It  was  to  this 
great  end,  that  they  established  the  present  bank. 

In  this  review,  it  will  be  no  less  instructive  than  curious  to 
notice  some  of  the  changes  made  in  the  opinions  of  promi- 
nent men,  yielding  to  the  authority  of  experience.  Mr.  Madi 
son,  who  was  the  leading  opponent  of  the  bank  created  in 
1791,  recommended  and  sanctioned  the  bank  created  in 
1816  ;  and  Mr.  Clay,  who  strenuously  opposed  the  renewal 
of  the  charter  in  1811,  as  strenuously  supported  the  proposi- 
tion to  grant  the  charter  in  1816. 

That  may  be  said  of  the  bank  charter,  which  can  be  said 
of  few  contested  questions  of  constitutional  power.  Both  the 
great  political  parties  that  have  so  long  divided  the  country, 
have  solemnly  pronounced  it  to  be  constitutional,  and  there 
are  but  very  few  of  the  prominent  men  of  either  party,  who 
do  not  stand  committed  in  its  favor.  When,  to  this  imposing 
array  of  authorities,  the  committee  add  the  solemn  and  una- 
nimous decision  of  the  supreme  court,  in  a  case  which  fully 
and  distinctly  submitted  the  constitutional  question  to  their 
cognizance,  may  they  not  ask,  in  the  language  of  Mr.  Dallas. 
'•can  it  be  deemed  a  violation  of  the  right  of  private  opinion 
to  consider  the  constitutionality  of  a  national  bank  as  a  ques 
tion  for  ever  settled  and  at  rest  ?" 

And  here  the  committee  beg  to  be  distinctly  understood,  as 
utterly  disclaiming  the  idea  of  ascribing  to  the  decision  of  any 


136  HANK  OF  THE  UNITED  STATES. 

or  of  all  the  departments  of  the  government  upon  a  great 
constitutional  question,  the  binding  authority  which  belongs 
to  judicial  precedents,  in  cases  of  mere  .private  right,  depend- 
ing upon  the  construction  of  the  ordinary  acts  of  the  legisla- 
ture. No  length  of  prescription,  or  concurrence  of  authority, 
can  consecrate  the  usurpation  of  powers  subversive  of  public 
liberty,  and  destructive  of  public  happiness.  But,  where  the 
power  exercised  is  clearly  conducive  to  the  public  welfare,  and 
its  constitutionality  is  merely  doubtful,  it  would  seem  to  be 
one  of  the  most  obvious  dictates  of  practical  wisdom,  to  re- 
gard the  decision  of  those  who  had  the  best  means  of  ascer- 
taining the  intention  of  the  constitution,  and  who  were 
actuated  by  the  most  undoubted  purity  and  disinterestedness 
of  motive,  as  of  sufficient  authority  at  least  to  overrule  theo- 
retical objections,  and  silence  individual  scruples. 

The  committee  will  now  submit  a  few  remarks,  with  the 
design  of  showing,  that,  viewing  the  constitutionality  of  the 
bank  as  an  original  question,  the  arguments  in  its  favor  are 
at  least  as  strong  as  those  against  it. 

The  earliest,  and  the  principal  objection  urged  against  the 
constitutionality  of  a  national  bank,  was,  that  congress  had 
not  the  power  to  create  corporations.  That  congress  has  a 
distinct  and  substantive  power  to  create  corporations,  without 
reference  to  the  objects  intrusted  to  its  jurisdiction,  is  a  pro- 
position which  never  has  been  maintained,  within  the  know- 
ledge of  the^committee  ;  but  that  any  one  of  the  powers  ex- 
pressly conferred  upon  congress,  is  subject  to  the  limitation, 
that  it  shall  not  be  carried  into  effect  by  the  agency  of  a  cor- 
poration, is  a  proposition  which  cannot  be  maintained,  in  the 
opinion  of  the  committee. 

If  congress,  under  the  authority  to  pass  all  laws,  necessary 
and  proper  for  carrying  into  effect  the  powers  vested  in  all  or 
any  of  the  departments  of  the  government,  may  rightfully 
pass  a  law  inflicting  the  punishment  of  death,  without  any 
other  authority,  it  is  difficult  to  conceive  why  it  may  not 
pass  a  law.  under  the  same  authority,  for  the  more  humble 


BANK  OF  THE  UNITED  STATES.  13? 

purpose  of  creating  a  corporation.  The  power  of  creating  a 
corporation  is  one  of  the  lowest  attributes,  or,  more  properly 
speaking,  incidents  of  sovereign  power.  The  chartering  of  a 
bank,  for  example,  does  not  authorize  the  corporation  to  do 
any  thing  which  the  individuals  composing  it  might  not  do 
without  the  charter.  It  is  the  right  of  every  individual  of  the 
Union  to  give  credit  to  whom  he  chooses,  and  to  obtain  credit 
where  he  can  get  it.  It  is  not  the  policy  of  any  commercial 
country  to  restrict  the  free  circulation  of  credit,  whether  in  the 
form  of  promissory  notes,  bills  of  exchange,  or  bank  notes. 
The  charter  of  the  Bank  of  the  United  States,  therefore, 
merely  enables  the  corporation  to  do,  in  an  artificial  capacity, 
and  with  more  convenience,  what  it  would  be  lawful  for  the 
individual  corporators  to  do  without  incorporation.  Mr. 
Girard  established  a  bank  in  Philadelphia,  without  a  charter, 
which  was  in  very  high  credit  within  the  sphere  of  its  circu- 
lation ;  and  it  cannot  be  doubted,  that  he  might  have  formed 
a  banking  copartnership  with  the  principal  capitalists  in  the 
other  commercial  cities  of  the  Union,  of  which  the  bills  would 
have  had  a  general  credit  in  every  part  of  the  country,  par- 
ticularly if  the  federal  government  had  provided  that  these 
bills  should  be  received  in  discharge  of  its  dues.  The  only 
material  particular  in  which  the  charter  of  the  Bank  of  the 
United  States  confers  a  privilege  upon  the  corporation,  appa- 
rently inconsistent  with  the  state  laws,  is,  the  exemption  of 
the  individual  property  of  the  corporators  from  responsibility 
for  the  debts  of  the  corporation.  But,  if  the  community  deal 
with  the  bank,  knowing  that  the  capital  subscribed  is  alone 
responsible  for  its  debts,  no  one  can  complain  either  of  imposi- 
tion or  injury  ;  and,  in  point  of  fact,  no  one  ever  has  com- 
plained on  that  score,  or  ever  will.  The  real  complaint  against 
the  bank,  is  not  that  it  has  not  a  sufficient  basis  for  its  credit, 
but  that  its  credit  is  too  extensive.  The  objection  lies,  there- 
fore, not  against  the  artificial  character  communicated  to  the 
stockholders  by  the  charter,  but  against  the  pecuniary  ope- 
rations of  the  bank  itself.  Now  these  operations  consist,  in 


138  BANK  OF  THE  UNITED  STATES. 

the  use  of  its  own  capital — a  faculty  not  surely  derived  from 
the  government,  but  in  the  exercise  of  which  the  government 
imposes  many  useful  restrictions  for  the  benefit  of  itself  and 
of  the  community. 

The  committee  have  presented  this  brief  analysis  of  a  bank 
corporation,  with  a  view  of  showing  that  there  is  nothing  in 
the  nature  of  the  thing  which  renders  it  unfit  to  be  an  in- 
strument in  the  hands  of  a  government,  admitted  to  be  sove- 
reign in  its  appropriate  sphere,  for  carrying  into  effect  powers 
expressly  delegated. 

It  now  remains  for  the  committee  to  show  that  the  Bank 
of  the  United  States  is  a  "  necessary  and  proper,"  or,  in  other 
words,  a  natural  and  appropriate,  means  of  executing  the 
powers  vested  in  the  federal  government.  In  the  discussion 
of  1791,  and  also  in  that  before  the  supreme  court,  the 
powers  of  raising,  collecting,  and  disbursing  the  public  re- 
venue, of  borrowing  money  on  the  credit  of  the  United 
States,  and  paying  the  public  debt,  were  those  which  were 
supposed  most  clearly  to  carry  with  them  the  incidental  right 
of  incorporating  a  bank,  to  facilitate  these  operations.  There 
can  be  no  doubt,  that  these  fiscal  operations  are  greatly  faci- 
litated by  a  bank,  and  it  is  confidently  believed  that  no  per- 
son has  presided  twelve  months  over  the  treasury,  from  its 
first  organization  to  the  present  time,  without  coming  to  the 
conclusion  that  such  institution  is  exceedingly  useful  to  the 
public  finances  in  time  of  peace,  but  indispensable  in  time  of 
war.  But  as  this  view  of  the  question  has  been  fully  un- 
folded in  former  discussions,  familiar  to  the  house,  the  com- 
mittee will  proceed  to  examine  the  relation  which  the  bank 
of  the  United  States  bears  to  another  of  the  powers  of  the  fe- 
deral government,  but  slightly  adverted  to  in  former  dis- 
cussions of  the  subject. 

The  power  to  "  coin  money  and  fix  the  value  thereof,"  is 
expressly  and  exclusively  vested  in  congress.  This  grant 
was  evidently  intended  to  invest  congress  with  the  power  of 
regulating  the  circulating  medium.  "  Coin^5  was  regarded, 


BANK  OP  THE  UNITED  STATE*. 

at  the  period  of  framing  the  constitution,  as  synonymous  will  i 
"  currency;"  as  it  was  then  generally  believed  that  bank  notes 
could  only  be  maintained  in  circulation  by  being  the  true  re- 
presentative of  the  precious  metals.  The  word  "  coin,"  there- 
fore, must  be  regarded  as  a  particular  term,  standing  as  the 
representative  of  a  general  idea.  No  principle  of  sound  con- 
struction will  justify  a  rigid  adherence  to  the  letter,  in  oppo- 
sition to  the  plain  intention  of  the  clause.  If,  for  example, 
the  gold  bars  of  Ricardo  should  be  substituted  for  our  present 
coins,  by  the  general  consent  of  the  commercial  world,  could 
it  be  maintained  that  congress  would  not  have  the  "power  to 
make  such  money,  and  fix  its  value,  because  it  is  not 
•"coined?"  This  would  be  sacrificing  sense  to  sound,  and 
substance  to  mere  form.  This  clause  of  the  constitution  i* 
analogous  to  that  which  gives  congress  the  power  to  i:  esta- 
blish post  roads."  Giving  to  the  word  "  establish"  its  re- 
stricted interpretation,  as  being  equivalent  to  "  fix,"  or  "  pre- 
scribe," can  it  be  doubted  that  congress  has  the  power  to  esta- 
blish a  canal  or  a  river  as  a  post  rout,  as  well  as  a  road  ? 
Roads  were  the  ordinary  channels  of  conveyance,  and  the 
term  was,  therefore,  used  as  synonymous  with  "  routs,"  what- 
ever might  be  the  channel  of  transportation,  and,  in  like 
manner,  "  coin,"  being  the  ordinary  and  most  known  form  of 
a  circulating  medium,  that  term  was  used  as  synonymous 
with  currency. 

An  argument  in  favor  of  the  view  just  taken,  may  be 
fairly  deduced  from  the  fact,  that  the  states  are  expressly  pro- 
hibited from  "  coining  money,  or  emitting  bills  of  credit,"  and 
from  "  making  any  thing  but  gold  and  silver  a  lawful  tender 
in  payment  of  debts."  This  strongly  confirms  the  idea,  that 
the  subject  of  regulating  the  circulating  medium,  whether 
consisting  of  coin  or  paper,  was,  at  the  same  time  that  it  was 
taken  from  the  control  of  the  states,  vested  in  the  only  depo- 
sitory in  which  it  could  be  placed,  consistently  with  the 
obvious  design  of  having  a  common  measure  of  value  through- 
out, the  Union. 


BANK  OF  THE  UNITED  STATE*. 

But  even  if  it  should  be  conceded  that  the  grant  of  power 
to  "  coin  money  and  fix  the  value  thereof,"  does  not,  in  its 
terms,  give  congress  the  power  of  regulating  any  other  than 
the  "  coined  "  currency  of  the  Union,  may  not  the  power  of 
regulating  any  substituted  currency,  and  especially  one  which 
is  the  professed  representative  of  coin,  be  fairly  claimed  as  an 
incidental  power — as  an  essential  means  of  carrying  into 
effect  the  plain  intention  of  the  constitution,  in  clothing  con- 
gress with  the  principal  power  ?  This  power  was  granted  in 
the  same  clause  with  that  to  regulate  weights  and  measures, 
and  for  similar  reasons.  The  one  was  designed  to  insure  a 
uniform  measure  of  value,  as  the  other  was  designed  to  in- 
sure a  uniform  measure  of  quantity.  The  former  is  decidedly 
the  more  important,  and  belongs  essentially  to  the  general 
government,  according  to  every  just  conception  of  our  system. 
A  currency  of  uniform  value  is  essential  to  what  every  one 
will  admit  to  be  of  cardinal  importance  :  the  equal  action  of 
our  revenue  system  upon  the  different  parts  of  the  Union. 
The  state  of  things  which  existed  when  the  bank  was  incor- 
porated, furnished  a  most  pregnant  commentary  on  this 
clause  of  the  constitution.  The  currency  of  the  country 
consisted  of  the  paper  of  local  banks,  variously  depreciated. 
At  one  of  the  principal  sea-ports  the  local  currency  was  20 
per  cent,  below  par.  Now  it  was  in  vain  for  congress  to  re- 
gulate the  value  of  coin,  when  the  actual  currency,  professing 
to  be  its  equivalent,  bore  no  fixed  relation  to  it.  This  great 
and  essential  power  of  fixing  the  standard  of  value,  was,  in 
point  of  fact,  taken  from  congress,  and  exercised  by  some 
hundreds  of  irresponsible  banking  corporations,  with  the 
strongest  human  motives  to  abuse  it,  because  their  enormous 
profits  resulted  from  the  abuse.  The  power  of  laying  and 
collecting  imposts  and  excises,  is  expressly  subject  to  the  con- 
dition that  they  "  shall  be  uniform  throughout  the  United 
States  ;"  and  it  is  also  provided,  that  "  no  preference  shall  be 
given,  by  any  regulation  of  commerce  or  revenue,  to  the  ports 
of  one  state  over  those  of  another."  Now,  when  it  is  known  that 


BANK  OF  THE  US  IT  ED  STATES.  141 

the  circulating  medium  of  Baltimore  was  20  per  cent,  below 
the  value  of  the  circulating  medium  of  Boston,  is  it  not  appa- 
rent that  an  impost  duty,  though  nominally  uniform,  would, 
in  effect,  make  a  discrimination  in  favor  of  Baltimore,  pro- 
portioned to  the  depreciation  of  the  local  currency  ?  Con- 
gress, therefore,  not  only  had  the  power,  but,  as  it  seems  to 
the  committee,  were  under  the  most  solemn  constitutional 
obligation  to  restore  the  disordered  currency  ;  and  the  Bank 
of  the  United  States  was  not  only  an  appropriate  means  for 
the  accomplishment  of  that  end,  but,  in  the  opinion  of  the 
committee,  the  only  safe  and  effectual  means  that  could  have 
been  used.  This  view  of  the  subject  is  in  full  accordance 
with  the  opinion  of  Mr.  Madison,  as  expressed  in  his  message 
of  December,  1816.  "  But,"  says  he,  "  for  the  interest  of  the 
community  at  large,  as  well  as  for  the  purpose  of  the  trea- 
sury, it  is  essential  that  the  nation  should  possess  a  currency 
of  equal  value,  credit,  and  use,  wherever  it  may  circulate. 
The  constitution  has  intrusted  congress,  exclusively,  with 
the  power  of  creating  and  regulating  a  currency  of  that  de- 
scription, and  the  measures  which  were  taken,  during  the 
last  session,  in  execution  of  the  power,  give  every  promise  of 
success.  The  Bank  of  the  United  States,  under  auspices  the 
most  favorable,  cannot  fail  to  be  an  important  auxiliary." 

Such  are  the  authorities  and  such  the  arguments  which 
have  brought  the  committee  to  the  conclusion,  that  the  power 
to  incorporate  a  bank  is  incidental  to  the  powers  of  collecting 
and  disbursing  the  public  revenue  ;  of  borrowing  money  on 
the  credit  of  the  United  States  ;  of  paying  the  public  debt : 
and  above  all,  of  fixing  and  regulating  the  standard  of  value, 
and  thereby  insuring,  at  least  so  far  as  the  medium  of  pay- 
ment is  concerned,  the  uniformity  and  equality  of  taxation. 

II.  The  next  question  proposed  for  consideration,  is  the  ex- 
pediency of  establishing  an  incorporated  bank,  with  a  view 
to  promote  the  great  ends  already  indicated.  In  discussing 
the  constitutionality  of  such  a  measure,  some  of  the  con- 
siderations which  render  it  expedient  have  been  slightly  un- 


\A'£  BANK  OF  THE  UNITED  STATED 

folded.     But  these  require  a  more  full  and  complete  develop 
ment,  while  others  remain  to  be  presented. 

It  must  be  assumed  as  the  basis  of  all  sound  reasoning  on 
this  subject,  that  the  existence  of  a  paper  currency,  issued  by 
banks  deriving  their  charters  from  the  state  governments, 
cannot  be  prohibited  by  congress.  Indeed  bank  credit  and 
bank  paper  are  so  extensively  interwoven  with  the  commer- 
cial operations  of  society,  that,  even  if  congress  had  the  con- 
stitutional power,  it  would  be  utterly  impossible  to  pro- 
duce so  entire  a  change  in  the  moneyed  system  of  the 
country,  as  to  abolish  the  agency  of  banks  of  discount, 
without  involving  the  community  in  all  the  distressing 
embarrassments  usually  attendant  on  great  political  revolu- 
tions, subverting  the  titles  to  private  property.  The  sudden 
withdrawal  of  some  hundred  millions  of  bank  credit,  would 
be  equivalent,  in  its  effects,  to  the  arbitrary  and  despotic  trans- 
fer of  the  property  of  one  portion  of  the  community  to  an- 
other, to  the  extent,  probably,  of  half  that  amount.  What- 
ever, therefore,  may  be  the  advantages  of  a  purely  metallic 
currency,  and  whatever  the  objections  to  a  circulating  medium 
partly  composed  of  bank  paper,  the  committee  consider  that 
they  are  precluded,  by  the  existing  state  of  things,  from  insti- 
tuting a  comparison  between  them,  with  a  view  to  any  prac- 
tical result. 

If  they  were  not  thus  precluded,  and  it  were  submitted  to 
them  as  an  original  question,  whether  the  acknowledged  and 
manifold  facilities  of  bank  credit  and  bank  paper,  are  not 
more  than  counterbalanced  by  the  distressing  vicissitudes  in 
trade,  incident  to  their  use,  they  are  by  no  means  prepared  to 
say,  that  they  would  not  give  a  decided  preference  to  the  more 
costly  and  cumbersome  medium. 

But  the  question  really  presented  for  their  determination, 
is  not  between  a  metallic  and  a  paper  currency,  but  between 
a  paper  curency  of  uniform  value,  and  subject  to  the  control 
of  the  only  power  competent  to  its  regulation,  and  a  paper 
mrrency  of  varying  and  fluctuating  value,  and  subject  to  no 


BANK  OF  THE  UNITED  STATES.  L4J 

common  or  adequate  control  whatever.  On  this  question  it 
would  seem  that  there  could  scarcely  exist  a  difference  of 
opinion  ;  and  that  this  is  substantially  the  question  involved  in 
considering  the  expediency  of  a  national  bank,  will  satisfac- 
torily appear  by  the  comparison  of  a  state  of  the  currency 
previous  to  the  establishment  of  the  present  bank,  and  its 
condition  for  the  last  ten  years. 

Soon  after  the  expiration  of  the  charter  of  the  first  bank 
of  the  United  States,  an  immense  number  of  local  banks 
sprung  up  under  the  pecuniary  exigencies  produced  by  the 
withdrawal  of  so  large  an  amount  of  bank  credit,  as  neces- 
sarily resulted  from  the  winding  up  of  its  concerns — an 
amount  faDing  very  little  short  of  fifteen  millions  of  dollars. 
These  banks  being  entirely  free  from  the  salutary  control 
which  the  bank  of  the  United  States  had  recently  exercised 
over  the  local  institutions,  commenced  that  system  of  impru- 
dent trading  and  excessive  issues,  which  speedily  involved 
the  country  in  all  the  embarrassments  of  a  disordered  cur- 
rency. The  extraordinary  stimulus  of  a  heavy  war  expen- 
diture, derived  principally  from  loans,  and  a  corresponding 
multiplication  of  local  banks,  chartered  by  the  double  score 
in  some  of  the  states,  hastened  the  catastrophe  which  must 
have  occurred,  at  no  distant  period,  without  these  extraordina- 
ry causes.  The  last  year  of  the  war  presented  the  singular 
and  melancholy  spectacle  of  a  nation  abounding  in  re- 
sources, a  people  abounding  in  self-devoting  patriotism,  and 
a  government  reduced  to  the  very  brink  of  avowed  bank- 
ruptcy, solely  for  the  want  of  a  national  institution,  which, 
at  the  same  time  that  it  would  have  facilitated  the  govern- 
ment loans  and  other  treasury  operations,  would  have  fur- 
nished a  circulating  medium  of  general  credit  in  every  part 
of  the  Union.  In  this  view  of  the  subject,  the  committee 
are  fully  sustained  by  the  opinion  of  Mr.  Dallas,  then  secre- 
tary of  the  treasury,  and  by  the  concurring  and  almost 
unanimous  opinion  of  all  parties  in  congress ;  for  whatever 
diversity  of  opinion  prevailed  as  to  the  proper  basis  and  or 


144         BANK  OF  THE  UNITED  STATES. 

ganization  of  a  bank,  almost  every  one  agreed  that  a  na- 
tional bank  of  some  sort  was  indispensably  necessary  to 
rescue  the  country  from  the  greatest  of  financial  calamities. 

The  committee  will  now  present  a  brief  exposition  of  the 
state  of  the  currency  at  the  close  of  the  war,  of  the  injury 
which  resulted  from  it,  as  well  to  the  government  as  to  the 
community,  and  their  reasons  for  believing  that  it  could  not 
have  been  restored  to  a  sound  condition,  and  cannot  now  be 
preserved  in  that  condition,  without  the  agency  of  such  an 
institution  as  the  Bank  of  the  United  States. 

The  price  current  appended  to  this  report  will  exhibit  a 
scale  of  depreciation  in  the  local  currency,  ranging  through 
various  degrees  to  twenty,  and  even  to  twenty- five  per  cent. 
Among  the  principal  eastern  cities,  Washington  and  Balti- 
more were  the  points  at  which  the  depreciation  was  greatest. 
The  paper  of  the  banks  in  these  places,  was  from  20  to  22 
per  cent,  below  par.  At  Philadelphia  the  depreciation  was 
considerably  less,  though  even  there  it  was  from  17  to  18  per 
cent.  In  New  York  and  Charleston,  it  was  from  7  to  10 
per  cent.  But  in  the  interior  of  the  country,  where  banks 
were  established,  the  depreciation  was  even  greater  than  at 
Washington  and  Baltimore.  In  the  western  part  of  Penn- 
sylvania, and  particularly  at  Pittsburg,  it  was  25  per  cent. 
These  statements,  however,  of  the  relative  depreciation  of 
bank  paper  at  various  places,  as  compared  with  specie,  give  a 
very  inadequate  idea  of  the  enormous  evils  inflicted  upon  the 
community,  by  the  excessive  issues  of  bank  paper.  No  pro- 
position is  better  established  than  that  the  value  of  money, 
whether  it  consists  of  specie  or  paper,  is  depreciated  in  exact 
proportion  to  the  increase  of  its  quantity,  in  any  given  state 
of  the  demand  for  it.  If,  for  example,  the  banks  in  1816 
doubled  the  quantity  of  the  circulating  medium  by  their  ex- 
cessive issues,  they  produced  a  general  degradation  of  the  en- 
tire mass  of  the  currency,  including  gold  and  silver,  propor- 
tioned to  the  redundancy  of  the  issues,  and  wholly  indepen- 
dent'of  the  relative  depreciation  of  bank  paper  at  different 
places,  as  compared  with  specie.  The  nominal  money  price 


UANK  OF  THE   UNITED  iSTATEfc.  M5 

ui  every  article  was  of  course  one  hundred  per  cent,  higher 
than  it  would  have  been,  but  for  the  duplication  of  the  quan- 
tity of  the  circulating  medium.  Money  is  nothing  more  nor 
less  than  the  measure  by  which  the  relative  value  of  all  arti- 
cles of  merchandise  is  ascertained.  If,  when  the  circulating 
medium  is  fifty  millions,  an  article  should  cost  one  dollar,  it 
would  certainly  cost  two,  if,  without  any  increase  of  the  uses 
of  a  circulating  medium,  its  quantity  should  be  increased  to 
one  hundred  millions.  This  rise  in  the  price  of  commodi- 
ties, or  depreciation  in  the  value  of  money,  as  compared  with 
them,  would  not  be  owing  to  the  want  of  credit  in  the  bank 
bills,  of  which  the  currency  happened  to  be  composed.  It 
would  exist  though  these  bills  were  of  undoubted  credit,  and 
convertible  into  specie  at  the  pleasure  of  the  holder,  and 
would  result  simply  from  the  redundancy  of  their  quantity.  It 
is  important  to  a  just  understanding  of  the  subject,  that  the 
relative  depreciation  of  bank  paper  at  different  places,  as  com- 
pared with  specie,  should  not  be  confounded  with  this  general 
depreciation  of  the  entire  mass  of  the  circulating  medium, 
including  specie.  Though  closely  allied,  both  in  their  causes 
and  effects,  they  deserve  to  be  separately  considered. 

The  evils  resulting  from  the  relative  depreciation  of  bank 
paper  at  different  places,  are  more  easily  traced'to  their  causes, 
more  palpable  in  their  nature,  and  consequently  more  gene- 
rally understood  by  the  community.  Though  much  less  ru- 
inous than  the  evils  resulting  from  the  general  depreciation 
of  the  whole  currency,  they  are  yet  of  sufficient  magnitude 
to  demand  a  full  exposition. 

A  very  serious  evil,  already  hinted  at,  whicli  grew  out  of 
the  relative  depreciation  of  bank  paper,  at  the  different  points 
of  importation,  was  its  inevitable  tendency  to  draw  all  the 
importations  of  foreign  merchandise  to  the  cities  where  the 
depreciation  was  greatest,  and  divert  them  from  those  where 
the  cunency  was  comparatively  sound.  If  the  Bank  of  the 
United  States  had  not  been  established,  and  the  government 
had  been  left  without  any  alternative,  but  to  reroivo.  tV  do 

19' 


146  BANK  OF  THE  UNITED  STATES. 

predated  local  currency,  it  is  difficult  to  imagine  the  extent 
to  which  the  evasion  of  the  revenue  laws  would  have  been 
carried.  Every  state  would  have  had  an  interest  to  encourage 
the  excessive  issues  of  its  banks,  and  increase  the  degrada- 
tion of  its  currency,  with  a  view  to  attract  foreign  commerce. 
Even  in  the  condition  which  the  currency  had  reached  in 
1816,  Boston  and  New  York  and  Charleston  would  have 
found  it  advantageous  to  derive  their  supplies  of  foreign  mer- 
chandise through  Baltimore ;  and  commerce  would  undoubt- 
edly have  taken  that  direction  had  not  the  currency  been  cor- 
rected. To  avoid  this  injurious  diversion  of  foreign  imposts, 
Massachusetts  and  New  York  and  South  Carolina  would  have 
been  driven  by  all  motives  of  self-defense  and  self-interest,  to  de- 
dgrae  their  respective  currencies  at  least  to  a  par  with  the  curren- 
cy of  Baltimore  ;  and  thus  a  rivalry  in  the  career  of  deprecia- 
tion would  have  sprung  up,  to  which  no  limit  can  be  assigned. 
As  the  tendency  of  this  state  of  things  would  have  been  to 
cause  the  largest  portion  of  the  revenue  to  be  collected  at  a 
few  places,  and  in  the  most  depreciated  of  the  local  currency, 
it  would  have  followed  that  a  very  small  part  of  that  revenue 
would  have  been  disbursed  at  the  points  where  it  was  col- 
lected. The  government  would  consequently  have  been 
compelled  to  sustain  a  heavy  loss  upon  the  transfer  of  its 
funds  to  the  points  of  expenditure.  The  annual  loss  which 
would  have  resulted  from  these  causes  alone,  cannot  be  esti- 
mated at  a  less  sum  than  two  millions  of  dollars. 

But  the  principal  loss  which  resulted  from  the  relative  de- 
preciation of  bad  paper  at  different  places,  and  its  want  of 
general  credit,  was  that  sustained  by  the  community,  in  the 
great  operations  of  commercial  exchange.  The  extent  of 
these  operations  annually  may  be  safely  estimated  at  sixty 
millions  of  dollars.  Upon  this  sum  the  loss  sustained  by  the 
merchants,  and  planters,  and  farmers,  and  manufacturers, 
was  not  probably  less  than  an  average  of  ten  per  cent.,  being 
the  excess  of  the  rate  of  exchange  beyond  its  natural  rate  in 
a  sound  state  of  the  currency,  and  beyond  the  rate  to  which 
it  has  been  actually  reduced  by  the  operations  of  the  Bank  of 


BANK  OP  THE  UNITED  STATIC  147 

the  United  States.  It  will  be  thus  perceived  that  an  annual 
tax  of  six  millions  of  dollars  was  levied  from  the  industrious 
and  productive  classes,  by  the  large  moneyed  capitalists  in  our 
commercial  cities,  who  were  engaged  in  the  business  of  broker- 
age. A  variously  depreciated  currency,  and  a  fluctuating  state 
of  the  exchanges,  open  a  wide  and  abundant  harvest  to  the  mo- 
ney brokers ;  and  it  is  not,  therefore,  surprising,  that  they 
should  be  opposed  to  an  institution,  which,  at  the  same  time 
that  it  has  relieved  the  community  from  the  enormous  tax 
just  stated,  has  deprived  them  of  the  enormous  profits  which 
they  derived  from  speculating  in  the  business  of  exchange. 
In  addition  to  the  losses  sustained  by  the  community,  in  the 
great  operations  of  exchange,  extensive  losses  were  suffered 
throughout  the  interior  of  the  country,  in  all  the  smaller  ope- 
rations of  trade,  as  well  as  by  the  failure  of  the  numerous 
paper  banks,  puffed  into  a  factitious  credit  by  fraudulent  arti- 
fices, and  having  no  substantial  basis  of  capital  to  insure  the 
redemption  of  their  bills. 

But  no  adequate  conception  can  be  formed  of  the  evils  of  a 
depreciated  currency,  without  looking  beyond  the  relative 
depreciation  at  different  places,  to  the  general  depreciation  of 
the  entire  mass.  It  appears  from  the  report  of  Mr.  Craw- 
ford, the  secretary  of  the  treasury  in  1820,  that  during  the 
general  suspension  of  specie  payments,  by  the  local  banks,  in 
the  years  1815  and  1816,  the  circulating  medium  of  the 
United  States  had  reached  the  aggregate  amount  of  one  hun- 
dred and  ten  millions  of  dollars,  and  that,  in  the  year  1819, 
it  had  been  reduced  to  forty-five  millions  of  dollars,  being  a 
reduction  of  fifty-nine  per  cent,  in  the  short  period  of  four 
years.  The  committee  are  inclined  to  the  opinion,  that  the 
severe  and  distressing  operation  of  restoring  a  vicious  cur- 
rency to  a  sound  state,  by  the  calling  in  of  bank  paper,  and 
the  curtailment  of  bank  discounts,  had  carried  the  reduction 
of  the  currency,  in  1819,  to  a  point  somewhat  lower  than 
was  consistent  with  the  just  requirements  of  the  community 
for  a  circulating  medium,  and  that  the  bank  discounts  have 
been  gradually  enlarged  since  that  time,  so  as  to  satisfy  those 


148 


AMv  OF  THE  UNITED.  STATE*. 


requirements.  It  will  be  assumed,  therefore,  that  the  circu- 
lating medium  of  the  United  States  has  been  fifty-five  mil- 
lions of  dollars  for  the  last  ten  years,  taking  the  average. 

Even  upon  this  assumption  it  will  follow,  that  the  national 
currency  has  been  one  hundred  per  cent,  more  valuable  for 
the  last  ten  years,  than  it  was  in  1816.  In  other  words,  two 
dollars  would  purchase  no  more  of  any  commodity  in  1816, 
than  one  dollar  has  been  capable  of  purchasing  at  any  time 
since  1819.  It  is  obvious,  therefore,  that  the  depreciation  of 
the  paper  of  particular  banks,  at  any  particular  time,  as  com- 
pared with  specie,  furnishes  no  criterion  by  which  to  ascertain 
the  general  depreciation  of  the  whole  currency,  including 
specie,  as  compared  with  the  value  of  that  currency  at  a  dif- 
ferent period.  A  specie  dollar,  in  1816,  would  purchase  no 
more  than  half  as  much  as  a  paper  dollar  will  purchase  at 
present. 

Having  endeavored  to  explain,  thus -briefly,  the  general  de- 
preciation resulting  from  a  redundant  currency,  the  com- 
mittee will  now  proceed  to  pohit  out  some  of  the  injurious 
consequences  which  have  resulted  from  those  great  changes 
in  the  standard  of  value,  which  have  been  unavoidably  pro- 
duced by  the  correction  of  the  redundancy. 

An  individual  who  borrowed  a  sum  of  money  in  1816,  and 
paid  it  in  1820,  evidently  returned  to  the  lender  double  the 
value  received  from  him  ;  and  one  who  paid  a  debt  in  1820, 
which  he  had  contracted  in  1816,  as  evidently  paid  double 
the  value  he  had  stipulated  to  pay,  though  nominally  the  same 
amount  in  money.  It  is  in  this  way  that  fluctuations  in  the 
quantity  and  value  of  the  currency  interfere,  in  the  most  un- 
just and  injurious  manner,  between  debtor  and  creditor. 

And  when  banks  have  the  power  of  suspending  specie 
payments,  and  of  arbitrarily  contracting  and  expanding  their 
issues,  without  any  general  control,  they  exercise  a  more 
dangerous  and  despotic  power  over  the  property  of  the  com- 
munity, than  was  ever  exercised  by  the  most  absolute  govern- 
ment. In  such  a  state  of  things,  every  man  in  the  commu- 
nity hold?  his  property  at.  the  mercy  of  money  making  cor- 


BAMv  OF   THi;   I'M'J  i.i>  STAJ  .  141J 

ionsj  which  have  a  decided  interest  to  abuse  their 
power. 

By  a  course  of  liberal  discounts  and  excessive  issues  for  a 
few  years,  followed  by  a  sudden  calling  in  of  their  debts,  and 
contraction  of  their  issues,  they  would  have  the  power  of 
transferring  the  property  of  their  debtors  to  themselves,  almost 
without  limit.  Debts  contracted  when  their  discounts  were 
liberal,  and  the  currency  of  course  depreciated,  would  be  col- 
lected when  their  discounts  were  almost  suspended,  and  the 
currency  of  course  unnaturally  appreciated  ;  and  in  this  way 
the  property  of  the  community  might  pass  under  the  ham- 
mer, from  its  rightful  owners  to  the  banks,  for  less  than  one 
half  its  intrinsic  value.  If  the  committee  have  not  greatly 
mistaken  the  matter,  there  is  more  of  history  than  of  specu- 
lation in  what  they  have  here  presented  to  the  consideration 
of  the  house. 

It  is  impossible  to  form  any  thing  like  an  accurate  estimate 
of  the  injuries  and  losses  sustained  by  the  community,  in 
various  ways,  by  the  disorders  and  fluctuations  of  the  cur- 
rency, in  the  period  which  intervened  between  the  expiration 
of  the  old  bank  charter,  and  the  establishment  of  the  present 
bank.  But  some  tolerable  notion  may  be  formed  of  the  losses 
sustained  by  the  government,  in  its  fiscal  operations,  during 
the  war. 

The  committee  have  given  this  part  of  the  subject  an  at- 
tentive and  careful  examination,  and  they  cannot  estimate 
the  pecuniary  losses  of  the  government,  sustained  exclusively 
for  the  want  of  a  sound  currency  and  an  efficient  system  of 
finance,  at  a  sum  less  than  forty-six  millions  of  dollars.  If 
they  shah1  make  this  apparent,  the  house  will  have  something 
like  a  standard  for  estimating  the  individual  losses  of  the 
community. 

The  government  borrowed,  during  the  short  period  of  the 
war,  eighty  millions  of  dollars,  at  an  average  discount  of 
fifteen  per  cent.,  giving  certificates  of  stock,  amounting  to 
eighty  millions  of  dollars,  in  exchange  for  sixty-eight  millions 


150  BANK  OF  THE  UNITED  STATES. 

of  dollars,  in  such  bank  paper  as  could  be  obtained.  In  this 
statement,  treasury  notes  are  considered  as  stock,  at  twenty 
per  cent,  discount.  Upon  the  very  face  of  the  transaction, 
therefore,  there  was  a  loss  of  twelve  millions  of  dollars,  which 
would  in  all  probability  have  been  saved,  if  the  treasury  had 
been  aided  by  such  an  institution  as  the  Bank  of  the  United 
States.  But  the  sum  of  sixty-eight  millions  of  dollars,  re- 
ceived by  the  government,  was  in  a  depreciated  currency,  not 
more  than  half  as  valuable  as  that  in  which  the  stock  given 
in  exchange  for  it  has  been  and  will  be  redeemed.  Here, 
then,  is  another  loss  of  thirty-four  millions,  resulting,  incon- 
testibly  and  exclusively,  from  the  depreciation  of  the  cur- 
rency, and  making,  with  the  sum  lost  by  the  discount,  forty- 
six  millions  of  dollars.  While,  then,  the  government  sus- 
tained this  great  pecuniary  loss  in  less  than  three  years  of 
war,  amounting  annually  to  more  than  the  current  expenses 
of  the  government  in  time  of  peace,  it  is  worth  while  to  in- 
quire, who  were  the  persons  who  profited  to  this  enormous 
amount,  by  the  derangement  of  the  currency  ?  It  will  be 
found  that  the  whole  benefit  of  this  speculation  upon  the  ne- 
cessities of  the  government,  was  realized  by  stockjobbers  and 
money  brokers,  the  very  same  class  of  persons  who  profited 
so  largely  by  the  business  of  commercial  exchanges,  in  con- 
sequence of  the  disorders  of  the  currency,  and  who  have  the 
same  interest  in  the  recurrence  of  those  disorders,  as  lawyers 
have  in  litigation,  or  physicians  in  the  diseases  of  the  human 
frame.  Having  presented  these  general  views  of  the  evils 
which  existed  previous  to  the  establishment  of  the  Bank  of 
the  United  States,  it  remains  for  the  committee  to  inquire  how 
far  this  institution  has  effected  a  remedy  of  those  evils. 

The  first  great  question  which  arises  under  this  branch  of 
the  inquiry  is,  whether  or  no  the  bank  has  corrected  the  dis- 
orders of  the  circulating  medium,  by  providing  a  paper  cur- 
rency, convertible  into  specie  at  the  pleasure  of  the  holder, 
nnd  of  equal  value  with  specie  at  all  points  of  the  Union  ? 


SANK  OF  THE  UNITED  STATES.  151 

The  chief  magistrate,  in  that  part  of  his  first  message 
which  relates  to  the  Bank  of  the  United  States,  expresses  the 
opinion,  that  "  it  has  failed  in  the  great  end  of  establishing 
a  uniform  and  sound  currency."  After  giving  to  this  opinion 
all  the  consideration  to  which  it  is  so  justly  entitled,  from  the 
eminent  station  and  high  character  of  the  citizen  by  whom  it 
is  entertained,  the  committee  are  constrained  to  express  their 
respectful  but  decided  dissent  from  it.  It  is  true,  that  the 
bank  does  not,  in  all  cases,  redeem  the  bills  issued  by  any- 
one of  its  branches,  indiscriminately  at  all  the  other  branches  : 
and  it  is  in  reference  to  this  fact,  as  the  committee  presume, 
that  the  president  expresses  the  opinion  that  the  institution 
has  failed  to  establish  "a  uniform  and  sound  currency." 

It  is  confidently  believed,  that  no  one  of  the  persons  who 
were  principally  instrumental  in  establishing  the  bank,  ever 
entertained  an  idea  that  it  would  attempt  to  redeem  its  bills 
at  any  of  its  offices,  other  than  those  by  which  they  should 
be  respectively  issued.  The  charter  certainly  contains  no  such 
requirement,  and  it  would  have  been  highly  inexpedient  if  it 
had,  to  say  nothing  of  its  obvious  injustice.  The  inevitable 
effect  of  such  a  requirement,  would  have  been  to  compel  the 
bank  to  perform  the  whole  of  the  commercial  exchanges  of 
the  country,  without  any  compensation.  It  would  not  be 
more  unjust  to  require  a  rail  road  company  to  transport  all 
the  productions  of  the  country  without  compensation.  No 
institution  could  stand  such  an  operation  ;  and  it  was  the  in- 
judicious attempt  of  the  first  direction  of  the  bank  to  do  it, 
that  principally  contributed  to  the  embarrassments  of  1819. 
A  committee  was  appointed  by  the  house  of  representatives, 
in  that  year,  to  investigate  the  management  of  the  bank  ;  and 
in  the  report  of  that  committee,  as  well  as  in  the  discussions 
to  which  it  gave  rise  in  the  house,  this  attempt  of  the  direc- 
tion to  redeem  the  bills  of  the  institution,  indiscriminately,  at 
all  its  branches,  was  indicated  as  one  of  the  causes  of  the 
existing  embarrassment.  No  one  who  participated  in  the  de- 
bate, pretended  to  alledge  that  the  bank  was  bound  to  redeem 


BANK  OF  THE  UNITED  STATES. 

its  bills  indiscriminately,  or  that  it  was  expedient  that  it 
should  do  so.  The  most  that  any  one  did.  was  to  apologize 
for  the  unwise  attempt. 

But  it  yet  remains  for  the  committee  to  show  that  this  in- 
discriminate redeem  ability  of  the  bills  of  all  the  branches  of 
the  bank,  is  not  necessary  to  "  the  establishment  of  a  uni- 
form and  sound  currency." 

Human  wisdom  has  never  effected,  in  any  other  country, 
a  nearer  approach  to  uniformity  in  the  currency,  than  that 
which  is  made  by  the  use  of  the  precious  metals.  If,  there- 
fore, it  can  be  shown  that  the  bills  of  the  United  States  Bank 
are  of  equal  value  with  silver  at  all  points  of  the  Union,  it 
would  seem  that  the  proposition  is  clearly  made  out,  that  the 
bank  has  accomplished  "  the  great  end  of  establishing  a 
uniform  and  sound  currency."  It  is  not  denied  that  the  bills 
of  the  mother  bank,  and  of  all  its  branches,  are  invariabl}" 
and  promptly  redeemed  in  specie,  whenever  presented  at  the 
offices  by  which  they  have  been  respectively  issued,  and  at 
which,  upon  their  face,  they  purport  to  be  payable.  Nor  is  it 
denied  that  the  bills  of  the  bank,  and  of  all  the  branches,  are 
equal  to  specie  in  their  respective  spheres  of  circulation.  Bills, 
for  example,  issued  by  the  mother  bank,  are  admitted  to  be 
equal  to  silver  in  Pennsylvania,  and  all  those  parts  of  the  ad- 
jacent states  of  which  Philadelphia  is  the  market.  But  it  is 
contended  that  these  bills,  not  being  redeemable  at  Charles- 
ton and  New  Orleans,  are  not  of  equal  value  with  silver  to 
the  merchant  who  wishes  to  purchase  cotton  with  them,  in 
those  cities.  Now,  if  the  Philadelphia  merchant  had  silver, 
instead  of  bank  bills,  he  certainly  could  not  effect  his  pur- 
chases with  it  in  Charleston  or  New  Orleans,  without  having 
the  silver  conveyed  to  those  places  ;  and  it  is  equally  certain 
that  he  could  not  have  it  conveyed  there,  without  paying  for 
its  transportation  and  insurance.  These  expenses  constitute 
the  natural  rate  of  exchange  between  those  cities,  and  indi- 
cate the  exact  sum  which  the  merchant  would  give  as  a  pre- 
mium for  ti  bill  of  exchange,  to  avoid  the  trouble  and  delay 


BANK  OF  THE  UNITED  STATES.  153 

of  transporting  his  specie.  It  is  obvious,  therefore,  that  even 
for  these  distant  operations  of  commerce,  silver  would  be  no 
more  valuable  than  the  bills  of  the  bank  :  for  these  would 
purchase  a  bill  of  exchange  on  either  of  the  cities  mentioned, 
precisely  as  well  as  silver.  If  the  operation  should  be  re- 
versed, and  the  planter  of  Louisiana  or  South  Carolina  should 
desire  to  place  his  funds  in  Philadelphia,  with  a  view  to  pur- 
chase merchandise,  he  would  find  the  bills  of  the  branch 
bank  in  either  of  those  states,  entirely  equivalent  to  silver  in 
effecting  his  object.  Even,  therefore,  if  the  bank  had  riot 
reduced  the  rate  of  the  exchanges,  it  might  be  safely  asserted, 
that  its  bills  would  be  of  equal  value  with  silver  at  every 
point  in  the  Union,  and  for  every  purpose,  whether  local  or 
general. 

But  it  is  impossible  to  exhibit  any  thing  like  a  just  view 
of  the  beneficial  operations  of  the  bank,  without  adverting 
to  the  great  reduction  it  has  effected,  and  the  steadiness  it  has 
superinduced,  in  the  rate  of  the  commercial  exchanges  of  the 
country.  Though  this  branch  of  the  business  of  the  bank 
has  been  the  subject  of  more  complaint,  perhaps,  than  any 
other,  the  committee  have  no  hesitation  in  saying,  it  has  been 
productive  of  the  most  signal  benefits  to  the  community}  and 
deserves  the  highest  commendation.  It  has  been  already 
stated  that  it  has  saved  the  community  from  the  immense 
losses  resulting  from  a  high  and  fluctuating  state  of  the  ex- 
changes. It  now  remains  to  show  its  effect  in  equalizing 
the  currency.  In  this  respect  it  has  been  productive  of  re- 
sults more  salutary  than  were  anticipated  by  the  most  san- 
guine advocates  of  the  policy  of  establishing  the  bank.  It  has 
actually  furnished  a  circulating  medium  more  uniform 
than  specie.  This  proposition  is  susceptible  of  the  clearest 
demonstration.  If  the  whole  circulating  medium  were  spe- 
cie, a  planter  of  Louisiana,  who  should  desire  to  purchase 
merchandise  in  Philadelphia,  would  be  obliged  to  pay  one  per 
cent,  either  for  a  bill  of  exchange  on  this  latter  place,  or  for 
the  transportation  and  insurance  of  his  specie.  His  specie  at 

20 


154  BANK  OF  THE  UNITED    STATES. 

New  Orleans,  where  he  he  had  no  present  use  for  it,  would 
be  worth  one  per  cent,  less  to  him  than  it  would  be  in  Phila- 
delphia, where  he  had  a  demand  for  it.  But,  by  the  aid  of 
the  Bank  of  the  United  States,  one  half  of  the  expense  of 
transporting  specie  is  now  saved  to  him.  The  bank,  for  one 
half  of  one  per  cent,  will  give  him  a  draft  upon  the  mother 
bank  at  Philadelphia,  with  which  he  can  draw  either  the  bills 
of  that  bank,  or  specie,  at  his  pleasure.  In  like  manner,  the 
bank  and  its  branches  will  give  drafts  from  any  point  of  the 
Union  to  any  other  where  offices  exist,  at  a  per  centage 
greatly  less  than  it  would  cost  to  transport  specie,  and  in  many 
instances  at  par.  If  the  merchant  or  planter,  however,  does 
not  choose  to  purchase  a  draft  from  the  bank,  but  prefers 
transmitting  the  bills  of  the  office  where  he  resides  to  any 
distant  point,  for  commercial  purposes,  although  these  bills 
are  not  strictly  redeemable  at  the  point  to  which  they  are 
transmitted,  yet,  as  they  are  receivable  in  payment  of  all  dues 
to  the  government,  persons  will  be  generally  found  willing 
to  take  them  at  par  ;  and  if  they  should  not,  the  bank  will 
receive  them  frequently  at  par,  and  always  at  a  discount 
mueh  less  than  would  pay  the  expense  of  transporting  specie. 
The  fact  that  the  bills  of  the  bank  and  its  branches  are  in- 
discriminately receivable  at  the  custom  houses  and  land 
offices,  in  payment  of  duties,  and  for  the  public  lands,  has  an 
effect  in  giving  uniformity  to  the  value  of  these  bills,  which 
merits  a  more  full  and  distinct  explanation. 

For  all  the  purposes  of  the  revenue,  it  gives  to  the  national 
currency  that  perfect  uniformity,  that  ideal  perfection,  to 
which  a  currency  of  gold  and  silver,  in  so  extensive  a  coun- 
try, could  have  no  pretensions.  A  bill  issued  at  Missouri  is 
of  equal  value  with  specie  at  Boston,  in  payment  of  duties  ; 
and  the  same  is  true  of  all  other  places,  however  distant, 
where  the  bank  issues  bills,  and  the  government  collects  its 
revenue.  When  it  is,  moreover,  considered,  that  the  bank 
performs  with  the  most  scrupulous  punctuality,  the  stipula- 
tion to  transfer  the  funds  of  the  government  to  any  point 


BANK  OP  THE  UNITED  STATER.  155 

where  they  may  be  wanted,  free  of  expense,  it  must  be  ap- 
parent that  the  committee  are  correct,  to  the  very  letter,  in 
stating  that  the  bank  has  furnished,  both  to  the  government 
and  to  the  people,  a  currency  of  absolutely  uniform  value 
in  all  places^  for  all  the  purposes  of  paying  the  public 
contributions,  and  disbursing"  the  public  revenue.  And, 
when  it  is  recollected,  that  the  government  annually  collects 
and  disburses  more  than  twenty-three  millions  of  dollars, 
those  who  are  at  all  familiar  with  the  subject  will  at  once 
perceive,  that  bills,  which  are  of  absolutely  uniform  value  for 
this  vast  operation,  must  be  very  nearly  so  for  all  the  pur- 
poses of  general  commerce. 

Upon  the  whole,  then,  it  may  be  confidently  asserted,  that 
no  country  in  the  world  has  a  circulating  medium  of  greater 
uniformity  than  the  United  States  ;  and  that  no  country  of 
any  thing  like  the  same  geographical  extent,  has  a  currency 
at  all  comparable  to  that  of  the  United  States  on  the  score  of 
uniformity.  The  committee  have  seen  the  statement  of  an 
intelligent  traveller,  who  has  visited  almost  every  part  of 
Europe,  exhibiting  the  great  variations  of  the  currency  in 
different  parts  of  the  same  empire  or  kingdom.  In  Russia, 
the  bills  of  the  bank  of  St.  Petersburg!!  have  a  very  limited 
circulation.  At  Riga,  and  throughout  Courland,  Livournia, 
and  all  the  southern  parts  of  the  empire,  the  currency  is  ex- 
clusively of  silver  coins.  In  Denmark,  the  notes  of  the  Bank 
of  Copenhagen  are  current  only  in  Zealand,  the  other  islands, 
and  Jutland,  but  will  not  pass  at  all  in  Sieswic  and  Holstein, 
which  constitute  the  best  portion  of  the  kingdom.  Since 
the  congress  of  Vienna,  Germany  is  divided  into  thirty -nine 
separate  states,  each  having  a  distinct  currency,  though  re- 
presented in  the  Diet  at  Frankfort.  Out  of  the  territory  in 
which  these  several  currencies  are  issued,  they  are  mere  arti- 
cles of  merchandise;  which  circumstance  has  given  rise  in 
every  town  to  a  numerous  and  distinct  class  of  tradesmen, 
called  money  changers.  How  far  these  separate  and  uncon- 
nected currencies  have  a  tendency  to  embarrass  commerce, 


BANK  OF  THE  UNITED  STATES. 

may  be  inferred  from  the  fact,  that  a  traveller  going  from  St. 
Petersburgh  to  Calais  will  lose,  upon  the  unavoidable  changes 
of  money,  an  average  of  six  per  cent.  In  France,  the  bills 
of  the  bank  are  of  such  large  denominations  as  to  be  adapted 
only  to  the  greater  operations  of  commerce,  and  are  princi- 
pally confined  to  the  bankers  and  extensive  traders  in  Paris. 
The  general  currency  is  silver ;  and  to  avoid  the  trouble  of 
carrying  this  to  distant  parts  of  the  kingdom,  gold  pieces,  or 
bills  of  exchange,  which  are  preferable,  are  purchased  at  a 
premium  of  from  one  and  a  half  to  four  per  cent.  After  this 
brief  review  of  the  currencies  of  Eiirope,  the  committee  will 
barely  state,  as  a  conclusive  vindication  of  our  currency  from 
the  imputation  of  unsoundness,  that  there  is  no  point  in  the 
Union,  at  which  a  bill  of  the  United  States  Bank,  issued  at 
the  opposite  extremity  of  the  country,  is  at  a  discount  of  more 
than  one  fourth  of  one  per  cent. 

In  confirmation  of  the  views  here  presented,  as  to  the  com- 
parative uniformity  of  the  currency  furnished  by  the  bank, 
and,  also,  as  to  the  obligation  of  the  bank  to  redeem  its  bills 
indiscriminately  at  all  the  offices,  the  committee  will  present 
a  few  brief  extracts  from  the  speech  of  a  statesman,  whose 
opinions  have  every  title  to  authority  on  these  important  sub- 
jects. Mr.  Lowndes,  in  discussing  the  question  how  far  the 
bank  had  performed  the  great  duty  for  which  it  was  created, 
used  the  following  decided  language  in  1819,  when  the  cur- 
rency had  not  reached  the  point  of  uniformity  it  has  now 
attained,  by  one  half  of  one  per  cent. 

"  The  great  object  of  the  government  in  chartering  the 
bank,  was  to  provide  a  currency  which  should  have  that  de- 
gree of  stability  and  uniformity  in  its  value,  which  is  required 
by  the  interests  both  of  our  commerce  and  revenue.  A  cur- 
rency, equally  valuable  at  every  place  and  every  time,  cannot 
be  provided  by  human  wisdom.  The  nearest  approach  to 
this  object  has  been  generally  supposed  to  be  afforded  by  the 
employment  of  gold  and  silver,  as  the  measures  of  value. 
The  14th  congress  did  not  aim  at  ideal  perfection  ;  they 


BANK  OF  THK    I'MTKh  STATES.  !"" 

wished  to  combine  with  the  conveniences  of  bank  circulation 
a  uniformity  of  value  equal  to  that  which  was  possessed  by 
the  precious  metals ;  and  the  means  which  they  employed  to 
secure  this  uniformity  were  simple  and  effectual,  by  enjoin- 
ing, under  a  heavy  penalty,  the  payment  of  all  its  notes  in 
coin,  upon  demand.  In  the  report,  indeed,  the  notes  of  the 
national  bank  are  said  to  be  now  '  on  the  same  footing  with 
those  of  local  banks.'  Of  the  footing  on  which  local  bank 
notes  stood,  he  should  speak  hereafter  :  but  the  price  current 
upon  his  table  informed  him,  that  the  greatest  discount  on 
branch  notes  on  the  United  States,  was  three  fourths  of  one 
per  cent.  This  was  a  value  much  more  uniform  than  that 
which  coin  could  be  expected  to  have  in  so  extensive  a  country. 
He  had  been  lately  looking  into  a  book  on  political  economy, 
which  had  been  published  here,  with  high,  and,  in  respect  to 
its  clearness  and  precision,  with  just  commendations — the 
work  of  Mr.  Tracy. 

"  He  inferred  from  one  of  his  chapters,  that  the  difference  of 
exchange  between  Marseilles  and  Paris  was  often  from  two 
to  three  per  cent.  If,  with  all  the  facilities  afforded  by  the  in- 
ternal improvements  in  which  France  is  so  rich,  with  a  cur- 
rency consisting  almost  exclusively  of  gold  and  silver,  the 
variation  in  the  value  of  money  is  three  times  greater  in  her 
territory  than  on  our  continent,  can  it  be  said,  that  in  this 
respect,  the  bank  has  not  fulfilled  the  objects  of  its  institution? 
Before  its  establishment,  the  value  of  bank  notes,  even  in  the 
commercial  states,  had  varied  twenty  per  cent,  from  each 
other  ;  and,  as  none  of  them  bore  a  fixed  proportion  to  the 
precious  metals,  or  to  any  natural  standard,  it  was  impossible 
to  assign  any  limit  to  their  depreciation.  You  have  required 
that  the  currency  furnished  by  the  national  bank  should  be 
every  where  convertible  into  silver,  and  it  is  so.  You  have 
expected  that  it  should  be  as  uniform  as  coin,  and  it  is  more 
so.  He  would  not  detain  the  committee  by  reading  a  paper, 
which  he  had  prepared  with  that  intention,  containing  the 
state  of  exchange,  since  the  establishment  of  the  bank,  with 


158  BANK  OP  THE  UNITED  STATKS. 

England,  France,  and  Holland,  for  he  found  himself  occupy- 
ing much  more  of  their  time  than  he  had  expected.  But  he 
believed  that  any  member,  who  should  turn  his  attention  to 
the  subject,  would  remark  its  steadiness  during  that  period. 
He  thought  himself  justified  in  drawing  from  this  fact  a  con- 
clusion highly  favorable  to  the  bank." 

In  reference  to  the  great  depreciation  of  the  paper  of  the 
local  banks,  previous  to  the  establishment  of  that  of  the 
United  States,  he  said  : 

"  Did  the  interests  or  duty  of  the  government  of  the  United 
States  permit  that  this  currency  should  be  received  by  it? 
Some  dissatisfaction  was  expressed  because  the  branch  notes 
of  the  United  States  Bank  were  at  a  discount  of  three  fourths 
of  one  per  cent.  He  read  from  a  price  current  the  state  of  the 
market  for  bank  notes,  by  which  it  appeared  that  notes,  which 
were  insisted  to  be  in  very  good  credit,  varied  from  a  discount 
of  two  and  a  half,  to  one  of  seven,  fifteen,  twenty-five,  and 
even  thirty  per  cent.  Was  our  revenue  to  be  received  in 
these  notes  ?  How  were  they  to  be  employed  ?  They  might 
be  expended  in  the  district  in  which  they  were  issued.  But 
was  the  expenditure  of  every  district  to  be  exactly  limited  to 
its  revenue  ?  What  became  of  the  Union  if  it  were  so  ?  He 
spoke  of  the  thing,  and  not  the  name.  Our  Union  might 
dissolve  in  imbecility,  as  well  as  be  destroyed  by  violence. 
Did  not  union  imply,  that  the  resources  of  one  state,  its 
money  as  well  as  its  men,  might  be  employed  for  the  defense 
of  another  ? 

"  But,  if  the  government  were  willing  to  bear  the  loss  of  a 
depreciated  and  unequal  currency,  it  must  neglect  the  plainest 
principle  of  the  constitution  in  doing  so — equality  of  taxation. 
The  committee  must  *  well  remember,  that,  before  the  esta- 
blishment of  the  national  bank,  such  was  the  unequal  value 
of  currency  in  the  different  states,  that  the  merchants  paid 
duties  varying  fifteen  per  cent  from  each  other,  on  the  same 
articles.' " 


BANK  OF  THE  UNITED  STATES.  159 

On  the  question  whether  the.bank  was  bound  to  redeem, 
indiscriminately,  the  bills  of  all  its  branches,  he  said : 

"  He  should  not  argue  that  the  bank  was  not  bound  to  pay 
its  notes,  indiscriminately,  at  all  its  offices.  He  believed  that 
nobody  now  contended  that  it  was."  "  It 

was  no  unfair  account  of  the  practical  operation  of  the  sys- 
tem of  which  he  was  speaking,  to  say,  that  it  gave  to  the 
branches  where  the  exchange  was  unfavorable,  the  entire 
disposition  of  the  specie  of  those  branches  where  the  ex- 
change was  favorable.  Upwards  of  six  millions  of  specie 
have  been  sent  to  the  branch  of  New  York,  besides  the 
amount  which  has  been  paid  by  the  subscribers  of  the  bank 
there ;  but,  in  issuing  notes  which  the  bank  of  New  York 
has  been  obliged  to  redeem,  every  branch  throughout  the 
country  has  drawn  upon  a  fund,  with  whose  condition,  at 
the  time,  he  could  not  be  acquainted."  *  "  Such 

a  system  might  be  expected  to  produce  inconvenient  changes 
in  the  distribution  of  bank  capital,  an  extreme  facility  of  ob- 
taining loans  at  one  time,  and  unexpected  contractions  of  dis- 
count at  another."  *  *  *  "  Whenever  the  state  of 
exchange  is  unfavorable,  whenever  the  just  principles  of 
banking  require  a  reduction  of  discounts,  then,  under  this 
system  of  indiscriminate  payment  of  its  notes,  the  bank  has 
nothing  to  fear  from  a  draft  of  specie,  and  is  encouraged  to 
lend  to  every  applicant.  Wherever  the  exchange  is  favorable, 
and  on  the  sound  principles  of  banking,  an  enlarged  accom- 
modation might  be  given  to  the  community — there  the  flow 
of  notes  from  every  state  whose  exchange  is  unfavorable, 
contracts  or  suspends  all  the  operations  of  the  bank.  Thus, 
wherever  discounts  should  be  enlarged,  the  tendency  of  this 
system  is  to  reduce  them,  and  to  enlarge  them  wherever  they 
should  be  reduced." 

Independently  of  the  gross  injustice  of  requiring  the  bank 
to  perform  all  the  exchanges  of  this  extensive  confederacy 
without  any  compensation,  these  enlightened  views  show 
most  conclusively  its  inexpediency  and  injustice,  as  it  regards 


160  BANK  OF  THE  UNITED  STATES. 

the  different  sections  of  the  Union.  It  would  inevitably  ren- 
der those  parts  of  the  Union  where  the  bank  issues  were  pru- 
dent and  moderate,  tributary  to  those  where  the  issues  were 
injudicious  and  excessive.  Tn  this  way,  the  very  inequality 
in  the  currency,  which  the  bank  was  designed  to  correct, 
would  be  perpetuated  by  the  vain  attempt  to  make  it  perform 
impossibilities.  The  power  of  annihilating  space,  of  trans- 
porting money  or  any  other  article  to  the  most  distant  points , 
without  the  loss  of  time  or  the  application  of  labor,  belongs  to 
no  human  institution. 

But  the  salutary  agency  of  the  Bank  of  the  United  States, 
in  furnishing  a  sound  and  uniform  currency,  is  not  confined 
to  that  portion  of  the  currency  which  consists  of  its  own  bills. 
One  of  the  most  important  purposes  which  the  bank  was  de- 
signed to  accomplish,  and  which,  it  is  confidently  believed,  no 
other  human  agency  could  have  effected,  under  our  federa- 
tive system  of  government,  was  the  enforcement  of  specie 
payments  on  the  part  of  numerous  local  banks,  deriving 
their  charters  from  the  several  states,  and  whose  paper,  irre- 
deemable in  specie,  and  illimitable  in  its  quantity,  constituted 
the  almost  entire  currency  of  the  country.  Amidst  a  com- 
bination of  the  greatest  difficulties,  the  bank  has  almost  com- 
pletely succeeded  in  the  performance  of  this  arduous,  delicate, 
and  painful  duty.  With  exceptions,  too  inconsiderable  to 
merit  notice,  all  the  state  banks  in  the  Union  have  resumed 
specie  payments.  Their  bills,  in  the  respective  spheres  of  their 
circulation,  are  of  equal  value  with  gold  and  silver  ;  while, 
for  all  the  operations  of  commerce,  beyond  that  sphere,  the 
bills  or  checks  of  the  Bank  of  the  United  States  are  even 
more  valuable  than  specie.  And  even  in  the  very  few  in- 
stances in  which  the  paper  of  state  banks  is  depreciated, 
those  banks  are  winding  up  their  concerns  ;  and  it  may  be 
safely  said,  that  no  citizen  of  the  Union  is  under  the  neces- 
sity of  taking  depreciated  paper,  because  a  sound  currency 
cannot  be  obtained.  North  Carolina  is  believed  to  be  the 
only  state  where  paper  of  the  local  banks  is  irredeemable  in 


BANK  OF  THE  UNITED  STATE*.  101 

specie,  and  consequently  depreciated.  Even  there,  the  de- 
preciation is  only  one  or  two  per  cent.,  and  what  is  more  im- 
portant, the  paper  of  the  Bank  of  the  United  States  can  be 
obtained  by  all  those  who  desire  it,  and  have  an  equivalent 
to  give  for  it.  The  committee  are  aware,  that  the  opinion  is 
entertained  by  some,  that  the  local  banks  would,  at  some 
time  or  other,  either  voluntarily  or  by  the  coercion  of  the 
state  legislatures,  have  resumed  specie  payments.  In  the 
very  nature  of  things  this  would  seem  to  be  an  impossibility. 
It  must  be  remembered  that  no  banks  ever  made  such  large 
dividends  as  were  realized  by  the  local  institutions,  during 
the  suspension  of  specie  payments.  A  rich  and  abundant 
harvest  of  profit  was  opened  to  them,  which  the  resumption 
of  specie  payments  must  inevitably  blast.  While  permitted 
to  give  their  own  notes,  bearing  no  interest,  and  not  redeem- 
able in  specie,  in  exchange  for  better  notes  bearing  interest,  it 
is  obvious,  that  the  more  paper  they  issued,  the  higher  would 
be  their  profits.  The  most  powerful  motive  that  can  operate 
upon  moneyed  corporations  would  have  existed,  to  prevent  the 
state  banks  from  putting  an  end  to  the  very  state  of  things, 
from  which  their  excessive  profits  proceeded.  Their  very 
nature  must  have  been  changed,  therefore,  before  they  could 
have  been  induced  to  co-operate,  voluntarily,  in  the  restora- 
tion of  the  currency.  It  is  quite  as  improbable  that  the  state 
legislatures  would  have  compelled  the  banks  to  do  their  duty. 
It  has  already  been  stated  that  the  tendency  of  a  depreciated 
currency  to  attract  importations  to  the  points  of  greatest  de- 
preciation, and  to  lighten  the  relative  burdens  of  federal  tax- 
ation, would  naturally  produce,  among  the  states,  a  rivalry  in 
the  business  of  excessive  bank  issues.  But  there  remains  to 
be  stated  a  cause,  of  more  general  operation,  which  would 
have  prevented  the  interposition  of  the  state  legislatures  to 
correct  those  issues. 

The  banks  were,  directly  and  indirectly,  the  creditors  of 
the  whole  community,  and  the  resumption  of  specie  pay 
ments  necessarily  involved  a  general  cui-taihuont  ot'disn.uiiN. 


162  BANK  OF  THE  UNITED  STATES. 

•*? 

and  withdrawal  of  credit,  which  would  produce  a  general  and 
distressing  pressure  upon  the  entire  class  of  debtors.  These 
constituted  the  largest  portion  of  the  population  of  all  the 
states  where  specie  payments  were  suspended,  and  bank 
issues  excessive.  Those,  therefore,  who  controlled  public 
opinion  in  the  states  where  the  depreciation  of  the  local  pa- 
per was  greatest,  were  interested  in  the  perpetuation  of  the 
evil.  Deep  and  deleterious,  therefore,  as  the  disease  evidently 
was  in  many  of  the  states,  their  legislatures  could  not 
have  been  expected  to  apply  a  remedy,  so  painful  as  the 
compulsion  of  specie  payments  would  have  been,  without  the 
aid  of  the  Bank  of  the  United  States.  And  here  it  is  wor- 
thy of  special  remark,  that,  while  that  bank  has  compelled 
the  local  banks  to  resume  specie  payments,  it  has  most  mate- 
rially contributed,  by  its  direct  aid  and  liberal  arrangements, 
to  enable  them  to  do  so,  and  that  with  the  least  possible  em- 
barrassment to  themselves,  and  distress  to  the  community.  If 
the  state  legislatures  had  been  ever  so  anxious  to  compel  the 
banks  to  resume  specie  payments,  and  the  banks  ever  so  wil- 
ling to  make  the  effort,  the  committee  are  decidedly  of  the 
opinion  that  they  could  not  have  done  it,  unaided  by  the 
bank  of  the  United  States,  without  producing  a  degree  of 
distress  incomparably  greater  than  has  been  actually  expe- 
rienced. They  will  conclude  their  remarks  on  this  branch  of 
the  subject  by  the  obvious  reflection,  that  if  congress,  at  the 
close  of  the  war,  had  left  it  to  the  states  to  restore  the  disor- 
dered currency,  this  important  function  of  sovereignty  would 
have  been  left  with  those  from  whom  the  constitution  has  ex- 
pressly taken  it,  and  by  whom  it  could  not  be  beneficially  or 
effectually  exercised.  But  another  idea,  of  considerable  plau- 
sibility, is  not  without  its  advocates.  It  is  said  that  this  go- 
vernment, by  making  the  resumption  and  continuance  of 
specie  payments  the  condition  upon  which  the  state  banks 
should  receive  the  government  deposits,  might  have  restored 
the  currency  to  a  state  of  uniformity.  Without  stopping  to 
their  reasons  for  believing  that  specie  payments  could  not 


B  A N K  uP  T H K  i; N IT E D  ST AT  1  I  * » '  > 

have  been  restored  in  this  way,  and  that,  even  if  they  could, 
a  uniform  currency  of  general  credit,  throughout  the  Union; 
would  not  have  been  provided,  the  committee  will  proceed  to 
give  their  reasons  for  thinking  that  such  a  connection  between 
the  federal  government  and  the  state  banks  would  be  exceed- 
ingly dangerous  to  the  purity  of  both.  While  there  is  a 
national  bank,  bound  by  its  charter  to  perform  certain  stipu- 
lated duties,  and  entitled  to  receive  the  government  deposits 
as  a  compensation  fixed  by  the  law  creating  the  charter,  and 
only  to  be  forfeited  by  the  failure  to  perform  those  duties,  there 
is  nothing  in  the  connection  at  all  inconsistent  with  the  in- 
dependence of  the  bank,  and  the  purity  of  the  government. 
The  country  has  a  deep  interest  that  the  bank  should  main- 
tain specie  payments,  and  the  government  an  additional  in- 
terest that  it  should  keep  the  public  funds  safely,  and  transfer 
them,  free  of  expense,  wherever  they  may  be  wanted.  The 
government,  therefore,  has  no  power  over  the  bank,  but  the 
salutary  power  of  enforcing  a  compliance  with  the  terms  of 
its  charter.  Every  thing  is  fixed  by  the  law,  and  nothing- 
left  to  arbitrary  discretion.  It  is  true,  that  the  secretary  of 
the  treasury,  with  the  sanction  of  congress,  would  have  the 
power  to  prevent  the  bank  from  using  its  power  unjustly  and 
oppressively,  and  to  punish  any  attempt,  on  the  part  of  the 
directors,  to  bring  the  pecuniary  influence  of  the  institution 
to  bear  upon  the  politics  of  the  country,  by  withdrawing  the 
government  deposits  from  the  offending  branches.  But  this 
power  would  not  be  lightly  exercised  by  the  treasury,  as  its 
exercise  would  necessarily  be  subject  to  be  reviewed  by  con- 
gress. It  is,  in  its  nature,  a  salutary  corrective,  creating  no 
undue  dependence  on  the  part  of  the  bank. 

But  the  state  of  things  would  be  widely  different,  if  there 
was  no  national  bank,  and  it  was  left  to  the  discretion  of  the 
secretary  of  the  treasury  to  select  the  local  banks  in  which 
the  government  deposits  should  be  made.  All  the  state 
banks  would,  in  that  case  be  competitors  for  the  favors  of  the 
treasury  :  and  no  one,  who  will  duly  consider  the  nature  of 


J3AAK  OF  THE  UNITED  STATi>, 

this  sort  of  patronage,  can  fail  to  perceive,  that,  in  the  hands 
of  an  ambitious  man,  not  possessed  of  perfect  purity  and  un- 
bending integrity,  it  would  be  imminently  dangerous  to  the 
public  liberty.  The  state  banks  would  enter  the  lists  of  po- 
litical controversy,  with  a  view  to  obtain  this  patronage  : 
and  very  little  sagacity  is  required  to  foresee,  that,  if  there 
should  ever  happen  to  be  an  administration  disposed  to  use 
its  patronage  to  perpetuate  its  power,  the  public  funds  would 
be  put  in  jeopardy  by  being  deposited  in  banks  unworthy  of 
confidence,  and  the  most  extensive  corruption  brought  to  bear 
upon  the  elections  throughout  the  Union.  A  state  of  things 
more  adverse  to  the  government — a  power  more  liable  to  be 
abused — can  scarcely  be  imagined.  If  five  millions  of  dol- 
lars were  annually  placed  in  the  hands  of  the  secretary  of  the 
treasury,  to  be  distributed  at  his  discretion,  for  the  purposes 
of  internal  improvement,  it  would  not  invest  him  with  a 
more  dangerous  and  corrupting  power. 

In  connection  with  this  branch  of  the  subject,  the  commit- 
tee will  briefly  examine  the  grounds  of  complaint,  some- 
i  imes  made  against  the  Bank  of  the  United  States.  It  is 
alledged  that  this  bank,  avails  itself  of  the  government  de- 
posits, consisting  in  some  places  principally  of  local  paper, 
makes  heavy  and  oppressive  drafts  on  the  local  banks  for 
specie,  and  thus  compels  them  to  curtail  their  discounts,  to 
the  great  injury  of  the  community.  In  the  first  place  it  is  to 
be  remarked,  that  one  of  the  highest  duties  of  the  bank — 
the  great  object  for  which  it  was  established— was  to  prevent 
the  excessive  issues  of  local  paper ;  and  this  duty  can  only 
be  performed,  by  enforcing  upon  the  state  banks  the  pay- 
ment of  specie  for  any  excess  in  their  issues.  But  the  com- 
mittee are  induced  to  believe,  that  this  complaint  is  principally 
owing,  so  far  as  it  now  exists,  to  the  fact,  that  the  operations 
of  the  federal  treasury  are  mistaken  for  the  operations  of  the 
bank,  because  the  bank  is  the  agent  by  whom  those  opera- 
lions  are  performed.  This  institution  receives  the  govern- 
ment deposit?  in  the  paper  of  the  local  banks,  certainly  in  no 


BANK  OF  THE   UNITED  JSTATi  165 

spirit  of  hostility  to  those  banks.  On  the  contrary,  it  tends 
to  give  them  credit,  and  is  designed  to  have  that  effect.  But 
the  Bank  of  the  United  States  is  not  only  bound  to  pay  in 
specie,  or  its  own  bills,  what  it  receives  for  the  government,  in 
local  paper,  but  to  transfer  the  funds  to  any  part  of  the  Union, 
where  they  may  be  required  for  disbursement.  Let  it  be  as- 
sumed, that  the  government  collects  annually,  at  the  custom 
house  in  Charleston,  one  million  of  dollars  in  local  bank 
notes,  and  disburses  in  South  Carolina  only  one  hundred 
thousand,  it  would  result  from  this,  that  the  government 
would  have  nine  hundred  thousand  dollars  of  local  bank 
paper  deposited  in  the  Charleston  branch,  which  the  bank 
would  be  bound  by  its  charter,  and  for  the  national  benefit, 
to  transfer  perhaps  to  Washington  or  Norfolk.  As  this  pa- 
per would  not  answer  the  purpose  of  the  government  at  those 
places,  the  bank  would  be,  of  course,  compelled  to  provide 
specie,  or  bills  that  will  command  specie  at  those  places.  It  is 
obvious,  then,  that  it  is  the  inequality  in  the  collection  and 
disbursement  of  the  revenue,  that  produces  the  evil  in  ques- 
tion, tf  ail  the  revenue  collected  in  Charleston  were  dis- 
bursed in  the  state,  no  drafts  would  be  made  upon  the  local 
banks  for  specie.  The  Bank  of  the  United  States,  so  far 
from  being  justly  obnoxious  to  any  complaint  on  this  score, 
has  greatly  mitigated  the  action  of  the  treasury  upon  the  lo- 
cal banks,  by  means  of  the  liberal  arrangements  which  its 
large  capital  and  numerous  branches  have  enabled  it  to  make 
with  them.  The  degree  in  which  that  institution  has  re- 
duced the  rate  of  exchange,  may  be  fairly  assumed  as  that, 
in  which  it  has  mitigated  the  action  of  the  treasury  upon  the 
state  banks.  If,  for  example,  there  existed  no  national  bank, 
and  the  deposits  of  the  revenue  collected  in  Charleston  were 
made  in  one  of  the  local  banks,  what  would  be  the  effect  of 
transferring,  annually,  nine  hundred  thousand  dollars  to 
Washington  and  Norfolk?  The  local  banks,  having  no 
branches  at  either  of  those  places,  instead  of  transmitting 
drafts.  ,is  is  now  generally  done,  would  be  compelled  to  trans- 


166  BANK  OF  THE  UNITED  STATES. 

mit  specie.  The  bank  in  which  the  government  deposits 
were  made,  would  consequently  be  under  the  necessity  of  de- 
manding specie  from  all  the  other  banks,  in  a  manner,  and  to 
an  extent,  much  more  oppressive  than  any  tiling  that  can  be 
imputed  to  the  Bank  of  the  United  States.  If,  to  avoid  these 
specie  drafts,  the  local  banks  should  purchase  bills  on  Wash- 
ington or  Norfolk,  they  would  probably  cost  five  or  six  per 
cent,  even  in  a  tolerable  state  of  the  currency,  which  would 
be  a  loss  to  the  banks  almost  to  the  full  extent  of  the  pre- 
mium. 

Although  the  expediency  of  renewing  the  charter  of  the 
present  bank  is  not  a  question  now  submitted  for  the  de- 
cision of  congress,  the  committee  consider  it  so  far  involved 
in  the  matter  referred  to  them,  as  to  render  it  their  duty  to 
present  some  considerations  bearing  on  that  question,  in  ad- 
dition to  what  they  have  said  en  the  general  expediency  of 
maintaining  such  an  institution.  If  a  national  bank,  simi- 
lar to  the  presnt,  be  a  necessary  and  proper  agent  for  the 
accomplishment  of  the  great  purposes  heretofore  indicated, 
the  only  remaining  question  would  seem  to  be,  whether  the 
charter  of  the  present  stockholders  should  be  renewed,  or  a 
new  set  of  stockholders  incorporated. 

In  considering  this  question,  congress  will  of  course  be 
governed,  in  some  degree,  by  the  terms  on  which  the  present 
stockholders  will  agree  to  accept  a  renewal  of  their  charter. 
But,  as  the  committee  have  satisfactory  reasons  for  believing 
that  terms  eminently  advantageous  to  the  government  can 
be  obtained,  they  will  proceed  to  some  other  inquiries.  What 
then  would  be  the  effect  of  refusing  to  renew  the  present 
charter?  And,  in  the  first  place,  what  are  the  inducements 
for  pursuing  that  course  ? 

It  is  sometimes  alledged  that  the  present  stockholders  are 
large  capitalists,  and,  as  the  stock  of  the  bank  is  some  twenty  per 
cent,  above  par,  that  a  renewal  of  the  charter  would  be  equi- 
valent to  a  grant  to  them  of  twenty  per  cent,  upon  their  capital. 
It  is  true,  that  a  small  proportion  of  the  capital  of  the  com 


HANK  OF  THE  UNITED  STATEfc.  U)< 

pany  belongs  to  very  wealthy  men.  Something  more  than 
two  millions  of  that  owned  in  the  United  States  belongs  to 
persons  holding  upwards  of  one  hundred  thousand  dollars 
each.  It  is  also  true  that  foreigners  own  seven  millions,  or  one- 
fifthof  the  capital.  But,  on  the  other  hand,  it  is  to  be  remarked 
that  the  government,  in  trust  for  the  people  of  the  United 
States,  holds  seven  millions ;  and  that  persons  owning  less 
than  five  thousand  dollars  each,  hold  four  millions  six  hun- 
dred and  eighty-two  thousand ;  and  that  persons  owning  be- 
tween five  and  ten  thousand  dollars  each,  hold  upwards  of 
three  millions.  It  is  also  worthy  of  remark,  that  a  very  con- 
siderable portion  of  the  stock — very  nearly  six  millions — is 
held  by  trustees  and  guardians,  for  the  use  of  females  and  or- 
phan children,  and  charitable  and  other  institutions.  Of 
the  twenty-eight  millions  of  the  stock  which  is  owned  by  in- 
dividuals, only  three  millions  four  hundred  and  fifty-three 
thousand  is  now  held  by  the  original  subscribers.  All  the 
rest  has  been  purchased  at  the  market  prices — a  large  portion 
of  it  probably  when  those  prices  were  higher  than  at  pre- 
sent. Most  of  the  investments  made  by  wills,  and  deeds,  and 
decrees  in  equity  for  the  use  of  females  and  minors,  are  be- 
lieved to  have  been  made  when  the  stock  was  greatly  above 
par.  From  this  brief  analysis,  it  will  appear  that  there  is 
nothing  in  the  character  or  situation  of  the  stockholders, 
Avhich  should  make  it  desirable  to  deprive  them  of  the  advan- 
tage which  they  have  fairly  gained,  by  an  application  of  their 
capital  to  purposes  highly  beneficial,  as  the  committee  have 
attempted  to  show  to  the  government  and  people  of  the 
United  States.  If  foreigners  own  seven  millions  of  the  stock 
of  the  bank,  our  own  government  owns  as  much ;  if  wealthy 
men  own  more  than  two  millions,  men  in  moderate  circum- 
stances own  between  seven  and  eight  millions  ;  and  widows, 
orphans,  and  institutions  devoted  to  charitable  and  other  pur- 
poses, own  nearly  six  millions. 

But  the  objection  that  the  stock  is  owned  by  men  of  large 
capital  would  apply  with  equal,  if  not  greater  force,  to  am 


168  BANK  OF  THE  UNITED  STATES. 

bank  that  could  be  organized.  In  the  very  nature  of  things, 
men  who  have  large  surplus  capitals  are  the  principal  subscri- 
bers at  the  first  organization  of  a  bank.  Farmers  and 
planters,  merchants  and  manufacturers,  having  an  active  em- 
ployment for  their  capitals,  do  not  choose  to  be  the  first  ad- 
venturers in  a  bank  project.  Accordingly,  when  the  present 
bank  went  into  operation,  it  is  believed  that  most  of  the  capi- 
tal was  owned  by  large  capitalists,  and  under  a  much  more 
unequal  distribution  than  exists  at  present.  The  large 
amount  of  stock  now  held  in  trust  for  females  and  minors, 
has  been  principally,  if  not  entirely,  purchased  since  the 
bank  went  into  operation ;  and  the  same  remark  is  generally 
applicable  to  that  stock  in  the  hands  of  small  holders.  It  is 
only  when  the  character  of  a  bank  is  fully  established,  and 
when  its  stock  assumes  a  steady  value,  that  these  descrip- 
tions of  persons  make  investments  in  it. 

It  is  morally  certain,  therefore,  that,  if  another  distinct  in- 
stitution were  created,  on  the  expiration  of  the  present  char- 
ter, there  would  be  a  much  greater  portion  of  its  capital  sub- 
scribed by  men  of  large  fortunes,  than  is  now  owned  by  per- 
sons of  this  description,  of  the  stock  of  the  United  States 
Bank.  Indeed,  it  might  be  confidently  predicted,  that  the 
large  capitalists  who  now  hold  stock  in  that  bank,  would, 
from  their  local  position,  and  other  advantages,  be  the  first  to 
forestall  the  subscriptions  to  the  new  bank,  while  the  small 
stockholders  scattered  over  the  country,  would  be  probably 
excluded,  and  the  females  and  minors,  and  others  interested 
in  trust  investments  made  by  decrees  in  equity,  would  be 
almost  necessarily  excluded,  as  the  sanction  of  a  court  could 
scarcely  be  obtained,  after  the  passage  of  the  new  act  of  in- 
corporation, in  time  to  authorize  a  subscription. 

To  destroy  the  existing  bank,  therefore,  after  it  has  rendered 
such  signal  services  to  the  country,  merely  with  a  view  to  in- 
corporate another,  would  be  an  act  rather  of  cruelty  and 
caprice,  than  of  justice  and  wisdom,  as  it  regards  the  present 
stockholders.  It  is  no  light  matter  to  depreciate  the  property 


BANK  OP  THE  UNITED  STATES.  169 

of  individuals,  honestly  obtained,  and  usefully  employed,  to 
the  extent  of  five  millions  six  hundred  thousand  dollars, 
and  the  property  of  the  government,  to  the  extent  of  one 
million  four  hundred  thousand  dollars,  purely  for  the  sake  of 
change.  It  would  indicate  a  fondness  for  experiment,  which 
a  wise  government  will  not  indulge  upon  slight  considera- 
tions. 

But  the  great  injury  which  would  result  from  the  refusal  of 
congress  to  renew  the  charter  of  the  present  bank,  would,  be- 
yond all  question,  be  that  which  would  result  to  the  commu- 
nity at  large.  It  would  be  difficult  to  estimate  the  extent  of 
the  distress  which  would  naturally  and  necessarily  result 
from  the  sudden  withdrawal  of  more  than  forty  millions  of 
credit,  which  the  community  now  enjoy  from  the  bank.  But 
this  would  not  be  the  full  extent  of  the  operation.  The 
Bank  of  the  United  States,  in  winding  up  its  concerns,  would 
not  only  withdraw  its  own  paper  from  circulation;  and  call  in 
-its  debts,  but  would  unavoidably  make  such  heavy  drafts  on 
the^local  institutions  for  specie,  as  very  greatly  to  curtail  their 
discounts.  The  pressure  upon  the  active,  industrious,  and 
enterprising  classes,  who  depend  most  upon  the  facilities  of 
bank  credit,  would  be  tremendous.  A  vast  amount  of-  pro- 
perty would  change  hands  at  half  its  value,  passing  under 
the  hammer,  from  the  merchants,  manufacturers,  and  farmers, 
to  the  large  moneyed  capitalists,  who  always  stand  ready  to 
avail  themselves  of  the  pecuniary  embarrassments  of  the 
community.  The  largest  stockholders  of  the  present  bank, 
the  very  persons  whose  present  lawful  gains  it  would  be  the 
object  of  some  to  cut  off,  having  a  large  surplus  money  capi- 
tal thrown  upon  their  hands,  would  be  the  first  to  speculate 
upon  the  distresses  of  the  community,  and  build  up  princely 
fortunes  upon  the  ruins  of  the  industrious  and  active  classes. 
On  the  other  hand,  the  females  and  minors,  and  persons  in 
moderate  circumstances,  who  hold  stock  in  the  institution, 
would  sustain  an  injury,  in  no  degree  mitigated  by  the  gene- 
ral  distress  of  the  community. 

22 


170  BANK  OF  THE  UNITED  STATES. 

A  very  grave  and  solemn  question  will  be  presented  to 
congress,  when  they  come  to  decide  upon  the  expediency  of 
renewing  the  charter  of  the  present  bank.  That  institution 
has  succeeded  in  carrying  the  country  through  the  painful 
process  necessary  to  cure  a  deep  seated  disease  in  the  na- 
tional currency.  The  nation,  after  having  suffered  the 
almost  convulsive  agonies  of  this  necessary  remedy,  is  now 
restored  to  perfect  health.  In  this  state  of  things  it  will  be 
for  congress  to  decide,  whether  it  is  the  part  of  wisdom  to  ex- 
pose the  country  to  a  degree  of  suffering  almost  equal  to  that 
which  it  has  already  suffered,  for  the  purpose  of  bringing 
back  that  very  derangement  of  the  currency  which  has  been 
remedied  by  a  process  as  necessary  as  it  was  distressing. 

If  the  Bank  of  the  United  States  were  destroyed,  and  the 
local  institutions  left  without  its  restraining  influence,  the  cur- 
rency would  almost  certainly  relapse  into  a  state  of  unsound- 
ness.  The  very  pressure  which  the  present  bank,  in  wind- 
ing up  its  concerns,  would  make  upon  the  local  institutions, 
would  compel  them  either  to  curtail  their  discounts  when  most 
needed,  or  to  suspend  specie  payments.  It  is  not  difficult  to 
predict  which  of  these  alternatives  they  would  adopt,  under 
the  circumstances  in  which  they  would  be  placed.  The  im- 
perious wants  of  a  suffering  community  would  call  for  dis- 
counts, in  language  which  could  not  be  disregarded.  The 
public  necessities  would  demand,  and  public  opinion  would 
sanction,  the  suspension,  or  at  least  an  evasion,  of  specie  pay- 
ments. 

But,  even  if  this  desperate  resort  could  be  avoided  in  a  pe- 
riod of  peace  and  general  prosperity,  neither  reason  nor  ex- 
perience will  permit  us  to  doubt,  that  a  state  of  war  would 
speedily  bring  about  all  the  evils  which  so  fatally  affected  the 
credit  of  the  government,  and  the  national  currency,  during 
the  late  war  with  Great  Britain.  We  should  be  again  driven 
to  the  same  miserable  round  of  financial  expedient,  which, 
in  little  more  than  two  years,  brought  a  wealthy  community 
almost  to  the  very  brink  of  a  declared  national  bankruptcy. 


BANK  OP  THE  UNITED  STATES.  171 

and  placed  the  government  completely  at  the  mercy  of  specu- 
lating stockjobbers. 

The  committee  feel  warranted,  by  the  past  experience  of 
the  country,  in  expressing  it  as  their  deliberate  opinion,  that, 
in  a  period  of  war,  the  financial  resources  of  the  country 
could  not  be  drawn  into  efficient  operation  without  the  aid  of 
a  national  bank,  and  that  the  local  banks  would  certainly  re- 
sort to  a  suspension  of  specie  payments.  The  maxim  is  emi- 
nently true  in  modern  times,  that  money  is  the  sinew  of  mi- 
litary power.  In  this  view  of  the  subject,  it  does  appear  to 
the  committee,  that  no  one  of  the  institutions  of  the  country, 
not  excepting  the  army  or  navy,  is  of  more  vital  importance 
than  a  national  bank.  It  has  this  decided  advantage  over 
the  army  and  navy,  while  they  are  of  scarcely  any  value 
except  in  war,  the  bank  is  not  less  useful  than  either  of  them 
in  war,  and  is  also  eminently  useful  in  peace.  It  has  another 
advantage  still  greater.  If,  like  the  army  or  navy,  it  should 
cost  the  nation  millions  annually  to  sustain  it,  the  expedi- 
ency of  the  expenditure  might  be  doubted.  But,  when  it 
actually  saves  to  the  government  and  to  the  country,  as  the 
committee  have  heretofore  attempted  to  show,  more  millions 
annually,  than  are  expended  in  supporting  both  the  army 
and  navy,  it  would  seem  that,  if  there  was  one  measure  of 
national  policy,  upon  which  all  the  political  parties  of  the 
country  should  be  brought  to  unite,  by  the  impressive  lessons 
of  experience,  it  is  that  of  maintaining  a  national  bank. 

It  is  due  to  the  persons  who  for  the  last  ten  years  have 
been  concerned  in  the  administration  of  the  bank,  to  state, 
that  they  have  performed  the  delicate  and  difficult  trust  com- 
mitted to  them,  in  such  a  manner  as  at  the  same  time  to  ac- 
complish the  great  national  ends  for  which  it  was  established, 
and  promote  the  permanent  interest  of  the  stockholders,  with 
the  least  practicable  pressure  upon  the  local  banks.  As  far 
as  the  committee  are  enabled  to  form  an  opinion  from  careful 
inquiry,  the  bank  has  been  liberal  and  indulgent  in  its  deal- 
ings with  these  institution!?,  and,  with  scarcely  an  exception, 


172  BANK  OF  THE  UNITED  STATES. 

now  stands  in  the  most  amicable  relation  to  them.  Some  of 
those  institutions  have  borne  the  most  disinterested  and  une- 
quivocal testimony  in  favor  of  the  bank. 

It  is  but  strict  justice  also  to  remark,  that  the  direction  of 
the  mother  bank  appears  to  have  abstained,  with  scrupulous 
care,  from  bringing  the  power  and  influence  of  the  bank  to 
bear  upon  political  questions,  and  to  have  selected,  for  the  di- 
rection of  the  various  branches,  business  men,  in  no  way  con- 
nected with  party  politics.  The  committee  advert  to  this 
part  of  the  conduct  of  the  directors,  not  only  with  a  view  to 
its  commendation,  but  for  the  purpose  of  expressing  their 
strong  and  decided  conviction  that  the  usefulness  and  stability 
of  such  an  institution  will  materially  depend  upon  a  steady 
and  undeviating  adherence  to  the  policy  of  excluding  party 
politics  and  political  partizans  from  all  participation  in  its 
management.  It  is  gratifying  to  conclude  this  branch  of  the 
subject  by  stating,  that  the  affairs  of  the  present  bank,  under 
the  able,  efficient,  and  faithful  guidance  of  its  two  last  presi- 
dents and  their  associates,  have  been  brought  from  a  state  of 
great  embarrassment  into  a  condition  of  the  highest  prosperi- 
ty. Having  succeeded  in  restoring  the  paper  of  the  local 
banks  to  a  sound  state,  its  resources  are  now  such  as  to  justi- 
fy the  directors  in  extending  the  issue  and  circulation  of  its 
paper  so  as  to  satisfy  the  wants  of  the  community,  both  as  it 
regards  bank  accommodations  and  a  circulating  medium. 
Upon  the  soundest  principles  of  banking,  the  very  ample  re- 
sources of  the  institution  would  justify  the  directors  in  grant- 
ing accommodations  to  a  much  greater  extent  than  they 
have  yet  done  ;  and  though  they  have  increased  the  circula- 
tion of  their  paper  from  four  and  a  half  to  fourteen  millions, 
since  January,  1823,  they  are  ready  and  willing  to  increase  it 
still  further,  by  discounting  bills  of  exchange,  and  other  busi- 
ness paper.  It  is  believed  that  the  discounts  and  issues  of  the 
institution  are  now  actually  limited  by  the  want  of  applica- 
tions resting  upon  these,  the  only  substantial  and  safe  founda- 
tions of  bank  credit  and  circulation. 


HANK  OF  THE  UNITED  STATES.  I  /  3 

III.  Having  said  tlms  much  on  the  constitutional ity  and 
expediency  of  an  incorporated  national  bank,  the  only  ques- 
tion which  remains  to  be  examined  by  the  committee  is  the 
expediency  of  establishing  a  "national  bank,  founded  upon 
the  credit  of  the  government  and  its  revenues." 

It  is  presumed  to  have  been  the  intention  of  the  president, 
in  suggesting  the  inquiry  as  to  a  bank  founded  upon  the 
credit  and  revenues  of  the  government,  to  be  understood  as 
having  allusion  to  a  bank  of  discount  and  deposit.  Such  a 
bank,  it  is  taken  for  granted,  would  have  branches  established 
in  various  parts  of  the  Union,  similar  to  those  now  esta- 
blished by  the  Bank  of  the  United  States,  and  co-extensive 
with  them.  The  great  object  of  furnishing  a  national  cur- 
rency could  not  be  accomplished,  with  an  approach  to  uni- 
formity, without  the  agency  of  such  branches  ;  and  another 
object,  second  only  in  importance  to  the  one  just  stated,  the 
extension  of  the  commercial  facilities  of  bank  accommoda- 
tions to  the  different  parts  of  the  Union,  could  not  be  at  all 
affected  without  such  agency.  If  there  should  be  simply  a 
great  central  bank  established  at  the  seat  of  government, 
without  branches  to  connect  its  operations  with  the  various 
points  of  the  commerce  of  the  Union,  the  promise  to  pay 
specie  for  its  notes,  whenever  presented,  would  be  almost 
purely  nominal.  Of  what  consequence  would  it  be  to  a 
merchant  or  planter  of  Louisiana,  or  a  manufacturer  or 
farmer  of  Maine,  that  he  could  obtain  specie  for  bills  of  the 
national  bank,  on  presenting  them  at  the  city  of  Washing- 
ton— a  place  wholly  unconnected  either  with  Louisiana  or 
Maine  by  any  sort  of  commercial  intercourse,  and  where, 
consequently,  these  bills  would  never  come  in  the  regular 
course  of  trade?  A  promise  to  pay  specie  at  a  place  so  re- 
mote from  the  place  of  circulation,  and  where  the  bills  would 
never  come  but  at  a  great  expense,  and  for  the  sole  purpose  of 
being  presented  for  payment,  would  neither  give  credit  to  the 
notes,  nor  operate  as  an  effective  check  upon  excessive  issues. 
Whatever  credit  such  notes  might  have,  at  a  distance  from 


174  BANK  OP  THE  UNITED  STATES. 

the  place  of  issue,  \>  ould  not  be  because  they  were  redeema- 
ble at  the  pleasure  of  the  holder — for  such  would  not  be  the 
fact ;  but  principally  because  of  the  ultimate  responsibility  of 
the  government,  and  of  their  being  receivable  in  payment  of 
all  dues  to  the  treasury.  They  would  rest,  therefore,  upon 
almost  precisely  the  same  basis  of  credit  as  the  paper  money 
of  our  revolution,  the  assignats  of  revolutionary  France,  and 
the  treasury  notes  of  the  late  war.  These  were  receivable  in 
discharge  of  debts  due  to  the  treasury,  and  government  was 
of  course  ultimately  responsible  for  their  payment ;  yet  the 
two  former  depreciated  almost  to  nothing,  and  the  latter, 
though  bearing  interest,  sunk  to  twenty  per  cent,  below  par. 
But  the  notes  of  a  central  government  bank,  without 
branches,  would  be  subject  to  depreciation  from  a  cause  which 
constitutes  a  conclusive  objection  to  such  an  institution. 
There  would  be  nothing  to  limit  excessive  issues  but  the 
discretion  and  prudence  of  the  government  or  of  the  di- 
rection. Human  wisdom  has  never  devised  any  adequate 
security  against  the  excessive  issues,  and,  consequently,  the 
depreciation  of  bank  paper,  but  its  actual,  and  easy,  and 
prompt  convertibility  into  specie,  at  the  pleasure  of  the 
holder.  Experience  has  shown,  that  where  the  paper  of  a 
bank  is  by  any  means  habitually  circulated  at  places  remote 
from  the  point  where  it  is  issued,  and  not  connected  with  it 
by  a  regular  commercial  intercourse,  there  will  not  exist  that 
easy  and  prompt  convertibility  which  is  so  essential  to  the 
credit  of  bank  paper.  When  bank  bills  are  confined  to  their 
appropriate  sphere  of  circulation,  a  redundant  issue  is  cer- 
tainly and  immediately  followed  by  a  run  upon  the  bank  for 
specie.  This  timely  admonition  is  as  useful  to  the  bank  as 
it  is  to  the  community  :  for  it  enables  the  directors  to  avoid, 
with  unfailing  certainty,  an  excess  equally  injurious  to  both, 
and  which  no  human  sagacity  could  anticipate  or  prevent 
by  calculation  merely.  Whatever,  therefore,  in  a  system  of 
bank  circulation,  prevents  the  reflux  of  redundant  issues, 


BANK  OF  THE  UNITED  STATES.  175 

necessarily  destroys  the  only  adequate  security  against  these 
injurious  and  ruinous  excesses. 

But  a  government  bank,  without  branches,  would  be  ob- 
noxious to  another  objection  which  could  not  be  obviated.  Its 
loans  would  be  confined  to  the  District  of  Columbia  ;  or,  if 
extended  to  the  various  parts  of  the  Union — to  say  nothing 
of  the  inconvenience  to  which  it  would  expose  those  at  a  dis- 
tance, who  obtained  accommodations— they  would  be  una- 
voidably granted  without  any  knowledge  of  the  circum- 
stances of  the  persons  upon  whose  credit  the  government 
would  depend  for  repayment.  It  would  in  fact  be,  for  all 
useful  purposes,  a  mere  district  bank. 

These  views  of  the  subject  have  brought  the  committee  to 
the  conclusion,  that,  if  a  government  bank  should  be  esta- 
blished, it  would  have  at  least  as  many  branches  as  the  Bank 
of  the  United  States,  and  probably  a  much  greater  number. 
Few  administrations  would  have  the  firmness  to  resist  an  ap- 
plication to  establish  a  branch,  coming  from  any  quarter  of 
the  Union,  however  injudicious  the  location  might  be,  upon 
correct  principles  of  commerce  and  banking. 

The  Bank  of  the  United  States  now  employs  five  hundred 
agents,  in  the  various  parts  of  the  Union  where  its  offices 
are  established.  From  this  fact  some  idea  may  be  formed  of 
the  very  great  addition  which  would  be  made  to  the  patron- 
age of  the  executive  government  by  the  establishment  of 
such  a  bank  as  the  one  under  consideration. 

But  the  patronage  resulting  from  the  appointment — the 
annual  appointment — of  those  agents,  great  as  it  would 
doubtless  be,  would  be  insignificant  and  harmless  when  com- 
pared with  that  which  would  result  from  the  dispensation  of 
bank  accommodations  to  the  standing  amount  of  at  least  fifty 
millions  of  dollars  !  The  mind  almost  instinctively  shrinks 
from  the  contemplation  of  an  idea  so  ominous  to  the  purity 
of  the  government  and  the  liberties  of  the  people.  No  go- 
vernment, of  which  the  committee  have  any  knowledge, 
except  perhaps,  the  despotism  of  Russia,  was  ever  invested 


176  BANK  OP  THE  UNITED  STATES. 

with  a  patronage  at  once  so  prodigious  in  its  influence  and  so 
dangerous  in  its  character.  In  the  most  desperate  financial 
extremities,  no  other  European  government  has  ever  ven- 
tured upon  an  experiment  so  perilous.  If  the  whole  patron- 
age of  the  English  monarchy  were  concentrated  in  the 
hands  of  the  American  executive,  it  may  be  well  doubted 
whether  the  public  liberty  would  be  so  much  endangered  by 
it  as  it  would  by  this  vast  pecuniary  machine,  which  would 
place  in  the  hands  of  every  administration  fifty  millions  of 
dollars,  as  a  fund  for  rewarding  political  partizans. 

Without  assuming  that  a  corrupt  use  would  be  made  of 
this  new  species  of  government  patronage,  a  very  slight  ac- 
quaintance with  the  practice  of  all  political  parties,  whatever 
may  be  their  professions,  will  be  sufficient  to  satisfy  any  re- 
flecting mind,  that  all  the  evil  consequences  of  corruption 
would  flow  from  its  exercise.  Have  not  our  political  con- 
tests too  frequently  degenerated  into  a  selfish  scramble  for 
the  offices  of  the  country  ?  Are  there  not  those  who  sincerely 
and  honestly  believe  that  these  offices  are  legitimate  ob- 
jects of  political  warfare,  and  the  rightful  reward  of  the  victo- 
rious party  ?  And  disinterested  and  patriotic  as  the  great 
body  of  every  political  party  is  admitted  to  be,  the  fact  is  no 
less  true  than  it  is  lamentable,  that  the  most  devoted  and  ac- 
tive partizans  are  very  often  mere  soldiers  of  fortune,  who 
watch  the  political  signs,  and  enlist,  at  the  eleventh  hour, 
under  the  banners  of  the  party  most  likely  to  prove  success- 
ful. Such  being,  more  or  less,  the  composition  of  all  political 
parties,  what  would  be  the  probable  use  made  of  fifty  millions 
of  bank  patronage,  by  a  political  party  who  conscientiously 
held  the  doctrine  that  all  the  offices  in  the  gift  of  the  execu- 
tive should  be  divided  among  the  partizans  of  a  successful 
political  leader  ?  Would  not  the  same  principle  be  even  more 
applicable  to  bank  loans  ?  And  would  not  the  treasury  of  the 
United  States,  under  the  sanctifying  influence  of  party  delu- 
sion and  party  infatuation,  be  literally  plundered  by  nierce- 


BANK  OF  Till:    TMTKU   STATES.  177 

nary  retainers,  bankrupts  in  fortunes,  and  adventurers  in 
politics  I 

Even  if  the  administration  should  be  ever  so  much  dis- 
posed to  restrain  the  abuse  of  this  patronage,  it  would  be  ut- 
terly impracticable  to  exercise  any  efficient  control  over  the 
great  number  of  bank  directors  who  would  be  scattered  over 
the  Union,  and  who,  upon  all  the  known  principles  of  hu- 
man nature,  it  may  be  confidently  predicted,  would  princi- 
pally consist  of  busy  and  officious  political  partizans. 

Such  would  be  the  depositaries — acting,  not  under  the 
public  eye,  but  under  the  protecting  mystery  of  a  sort  of 
concealment  and  secrecy  deemed  indispensable  in  banking 
operations — to  whom,  not  only  the  whole  treasury  of  the 
Union  would  be  confided,  to  be  squandered,  perhaps,  in  pro- 
fligate favoritism,  but  the  tremendous  power  of  putting  the 
whole  property  of  the  nation  under  mortgage,  for  the  redemp- 
tion of  the  bills  issued  at  their  discretion.  To  say  nothing 
of  the  utter  insecurity  of  the  public  revenues  under  such  a 
system,  a  new  species  of  legislative  power,  unknown  to  the 
constitution,  would  be  committed  to  these  irresponsible  bank 
directors,  of  which  no  human  sagacity  can  predict  the  conse- 
quences* 

A  just  analysis  of  the  operation  of  granting  loans  by  this 
government  bank,  in  exchange  for  notes  of  private  individu- 
als, will  show,  that  it  involves  the  exercise,  on  the  part  of  the 
directors  of  the  twofold  power  of  appropriating  the  public  re- 
venue in  the  most  dangerous  of  all  forms — discretionary 
loans— and  of  pledging  the  responsibility  of  the  government 
to  an  unlimited  extent,  for  the  payment  of  the  debts  at  the 
same  time  created  against  it.  These  are  among  the  highest 
functions  of  legislative  power,  and  have  been  expressly  and 
exclusively  vested  in  congress.  Unless,  therefore,  it  be  as- 
sumed, that  congress  may  rightfully  transfer  the  powers  with 
which  it  is  invested  to  these  batik  directors,  it  will  be  difficult 
to  find  any  warrant,  either  in  the  letter  or  spirit  of  the  consti- 
tution, for  the  creation  of  this  tremendous  engine  of  pecu- 

23 


178  BANK  OF  THE  UNITED  STATES. 

niary  influence.  It  may,  indeed,  be  doubted,  whether  all  the 
branches  of  the  legislative  authority  united  have  any  consti- 
tutional power  to  lend  the  public  revenue,  either  to  individu- 
als, corporations,  or  states,  without  referenced  the  objects  to 
which  it  shall  be  applied.  But  whatever  may  be  the  power 
of  congress  on  this  subject,  it  appears  to  the  committee  to  be 
inexpedient,  in  every  view  of  the  question,  that  the  govern- 
ment should  be  converted  into  a  great  money  lender.  There 
is  no  species  of  trade  in  which  it  would  be  wise  for  the  go- 
vernment to  embark  ;  but  of  all  the  variety  of  pursuits  known 
to  human  enterprise,  that  of  lending  money  by  the  govern- 
ment to  the  citizens  of  the  country  would  be  fraught  with 
the  most  pernicious  consequences. 

In  the  first  place,  it  is  a  business  to  which,  in  the  very  na- 
ture of  things,  no  government  is  adapted,  and,  least  of  all,  a 
popular  government.  There  is  no  employment  of  capital 
that  requires  a  more  vigilant  and  skillful  superintendence. 
Nothing  but  the  active  motive  of  individual  interest  can  sup- 
ply the  watchfulness  necessary  to  secure  a  banking  institu- 
tion against  the  grossest  frauds  and  imposition?.  In  pecu- 
niary transactions,  few  men  are  to  be  found  who  will  serve 
others,  in  cases  involving  the  exercise  of  discretionary  powers, 
with  the  same  fidelity  that  they  would  serve  themselves;  and, 
when  we  consider  the  strong  motives,  both  of  private  friend- 
ship and  political  attachment,  which  would  operate  on  the  di- 
rectors of  a  government  bank,  to  bestow  its  favors  without 
impartiality  or  prudence,  it  requires  but  little  sagacity  to  fore- 
see that  enormous  losses  would  be  annually  sustained  by  the 
insolvency  of  the  government  debtors. 

All  governments  have  found  it  expedient  to  place  the  pub- 
lic treasury  under  the  guardianship  of  a  high  and  confideii 
tial  officer,  aided,  in  the  enforcement  of  a  rigid  responsibility, 
by  a  system  of  checks  and  counterchecks,  operating  upon  all 
the  subordinate  officers  concerned  in  collecting  and  disbursing 
the  public  revenue.  Such  is  our  own  system.  No  discretion 
is  vested  in  the  chief  officer  of  the  treasury,  much  lens  in  those 


T:\XK  IIF  Tin:  i  MTI'.D  STATES.  179 

tliaf,  are  subordinate,  in  the  appropriation  of  a  single  dollar 
of  the  public  money.  "No  money  can  be  drawn  from  the 
treasury  but  in  consequence  of  appropriations  made  by  law.'' 
How  far  these  wise  and  provident  safeguards,  and  this  consti- 
tutional barrier,  would  be  prostrated,  by  placing  not  only  the 
public  revenue,  but  the  public  credit,  at  the  disposal  of  some 
hundreds  of  bank  directors  in  various  parts  of  the  Union,  is 
a  very  grave  question  for  the  consideration  of  the  house. 

Our  own  experience  has  demonstrated  the  great  danger  of 
having  large  masses  of  the  community  indebted  to  the  go- 
vernment. It  was  a  deep  conviction  of  this  danger  that  in- 
duced congress  to  abolish  the  system  of  credit  sales  in  the 
disposition  of  public  lands.  Congress  has  been  compelled  to 
yield  to  the  pressing  importunities  of  the  purchasers  of  these 
lands,  by  granting  them  not  only  repeated  indulgencies,  but 
by  the  remitting  some  millions  of  the  debt.  What  then, 
would  be  the  situation  of  the  government,  with  a  debt  of  fifty 
millions  diffused  throughout  the  country,  and  due  to  it  from 
the  most  active,  enterprising,  and  influential  classes  of  the 
community  ?  Nothing  that  has  happened  can  be  more  cer- 
tain than  that  every  unfavorable  vicissitude  in  trade,  every 
period  of  commercial  distress  and  embarrassment,  would  give 
rise  to  importunate  and  clamorous  calls  for  indulgence,  and 
for  an  injudicious  extension  of  discounts,  which  no  adminis- 
tration would  have  the  firmness  to  resist.  Every  one  who 
has  witnessed  the  urgency  and  unanimity  with  which  the 
representatives  of  the  states  indebted  for  public  lands,  have 
pressed  the  claims  of  their  citizens  for  indulgence  and  remis- 
sion, must  be  satisfied,  that  if  the  citizens  of  all  the  states 
should  become  indebted  much  more  largely  for  bank  loans, 
the  government  would  have  scarcely  any  faculty  of  resist- 
ance, when  appeals  for  indulgence  should  come  from  all 
quarters  of  the  Union,  sustained  by  the  strong  plea  of  public 
distress  and  embarrassment. 

The  policy  of  extending  indulgence  to  the  public  debtors, 
and  of  granting  more  liberal  loans  to  the  community,  would, 


180  BANK  OF  TTTE  UNITED  STATES. 

in  the  natural  course  of  tilings,  become  the  favorite  of  those 
who  aspired  to  popular  favor.  Political  parties  would  come  to 
be  divided  upon  the  question  of  observing  towards  the  public 
debtors  a  strict  banking  policy,  indispensable  to  the  main- 
tenance of  specie  payments  on  the  one  hand,  or  a  liberal  go- 
vernment policy,  necessarily  involving  a  suspension  of  specie 
payments  on  the  other.  And  when  it  is  considered  that  the 
whole  class  of  debtors,  always  the  most  numerous  and  active 
portion  of  the  community,  would  be  naturally  in  favor  of  in- 
creasing bank  issues,  and  extending  bank  indulgences,  it  can 
scarcely  be  doubted  that  specie  payments  would  be  suspended 
in  the  first  great  pecuniary  exigency,  growing  out  of  the  em- 
barrassments in  our  commerce,  or  deficiencies  in  our  revenue. 

The  government  therefore,  which  is  under  the  most  sacred 
obligations  to  constrain  all  the  banks  to  maintain  specie  pay- 
ments, with  a  view  to  the  uniformity  and  soundness  of  the 
currency,  would,  by  its  own  example,  perpetuate  the  great  na- 
tional evil  of  a  fluctuating  and  depreciated  circulating  me- 
dium. 

These  evils  which  would  be  so  highly  probable  in  time  of 
peace,  would  be  almost  certain  in  the  event  of  war.  The 
temptation  to  supply  the  federal  treasury,  by  the  easy  process 
of  bank  issues,  rather  than  resort  to  the  unpopular  process  of 
internal  taxation,  would  be  too  fascinating  to  be  resisted.  We 
should  thus  experience,  what  every  nation  has  experienced  in 
like  circumstances,  the  manifold  evils  of  a  mere  paper  cur- 
rency, having  no  relation  to  any  standard  of  intrinsic  value. 
In  these  views  the  committee  are  fully  sustained  by  the 
opinion  of  Mr.  Lowndes,  expressed  in  1819.  These  are  his 
words  :  "  That  the  destruction  of  the  (United  States)  Bank 
would  be  followed  by  the  establishment  of  paper  money,  he 
firmly  believed  ;  he  might  almost  say  he  knew."  It  was  an 
extremity  from  which  the  house  would  recoil,  if  now  pro- 
posed ;  but  if  the  resolutions  on  the  table  were,  passed,  it 
would  very  soon  be  proposed.  The  subject  was  too  large  for 
an  incidental  discussion.  Gentlemen  thought  the  amount  of 


BANK  OF  TITR  UNITED  STATES.  181 

government  paper  might  be  limited,  and  depreciation  pre- 
vented ,  by  the  rate  of  interest  which  should  be  exacted.  In- 
adequate every  where,  the  security  was  particularly  ineffectual 
in  the  United  States. 

But  the  inevitable  tendency  of  a  government  bank  to  in- 
volve the  country  in  a  paper  system,  is  not,  in  the  opinion  of 
the  committee,  the  greatest  objection  to  it.  The  powerful, 
and  in  the  hands  of  a  bad  administration,  the  irresistible  and 
corrupting  influence  which  it  would  exercise  over  the  elections 
of  the  country,  constitutes  an  objection  more  imposing  than 
all  others  united.  No  matter  by  what  means  an  administra- 
tion might  get  into  power  with  such  a  tremendous  engine  in 
their  hands,  it  would  be  almost  impossible  to  displace  them 
without  some  miraculous  dispensation  of  Providence. 

Deeply  impressed  with  the  conviction,  that  the  weak  point 
of  a  free  government  is  the  absorbing  tendency  of  executive 
patronage,  and  sincerely  believing  that  the  proposed  bank 
would  invest  that  branch  of  the  government  with  a  weight 
of  moneyed  influence,  more  dangerous  in  its  character  and 
more  powerful  in  its  operation  than  the  entire  mass  of  its  pre- 
sent patronage,  the  committee  have  felt  that  they  were  im- 
periously called  upon  by  the  highest  considerations  of  public 
duty,  to  express  the  views  they  have  presented,  with  a  frank- 
ness and  freedom  demanded  by  the  occasion.  It  is  at  the 
same  time  due  to  their  own  feelings,  that  they  should  state, 
unequivocally,  their  [conviction,  that  the  suggestion  of  the 
chief  magistrate,  which  they  have  thus  freely  examined,  pro- 
ceeded from  motives  of  the  most  disinterested  patriotism,  and 
was  exclusively  designed  to  promote  the  welfare  of  the  coun- 
try. This  is  not  the  mere  formal  and  heartless  homage  some- 
times offered  up  to  official  station  either  from  courtesy  or  in- 
terest, but  a  tribute  which  is  eminently  due,  and  cheerfully 
rendered,  to  the  exalted  character  of  the  distinguished  indi- 
vidual on  whom  it  is  bestowed. 


STATISTICAL  AND  COMPARATIVE  VIEW 

OK   THE 

MONEYED  INSTITUTIONS  OF  NEW  YORK, 

AND  TWENTY-FOUR  OF  THE  PRINCIPAL  CITIES  OF  THE 

UNITED  STATES  : 

Showing  the  amount  of  each  share,  and  the  product  of  each  institution,  from  the  1st  of 

January,  1830,  to  the  1st  of  January,  1831.    Compiled  from  official  sources,  private 

correspondence,  and  personal  investigation. 


BANKINCi    INSTITUTIONS  OF  THE 


185 


-«i       -»M  -#j 


j  >  !>  >i>»>>>%>  >  t*»C 

^sgSISSsSsgS'S 


w 
tf 
o 

PH 

H 
a 


« 


fCDO^nmc^    ic^i-HC^Tf^MTj. 

I  i— i  O^  <M  O  >— (     !    i— I  M  <M  C<  i— I  ci 
IGOt—  QOCDOOCDOOCDOOCDaOCD 


j 

D 


186  UNITED  STATES. 


DELAWARE  AND  HUDSON  CANAL  COMPANY, 

THERE  is  probably  no  improvement  of  equal  magnitude 
and  utility  in  this  country,  in  relation  to  which  so  little  is 
known  by  the  community  in  general,  and  perhaps,  it  maybe 
added,  the  stockholders  themselves,  as  the  canal  and  railroad 
of  the  Delaware  and  Hudson  Canal  Company.  This  im- 
provement, extending  from  one  of  the  finest  rivers  in  the 
country,  one  hundred  and  twenty-four  miles  into  the  interior, 
and  terminating  in  one  of  the  best  coal  fields  in  Pennsylva- 
nia, was  in  operation  from  the  middle  of  April  to  the  15th  of 
December  last,  when  the  canal  closed :  in  that  time  forty- 
three  thousand  two  hundred  tons  of  coal  were,  through  this 
new  avenue,  added  to  the  usual  supply  of  the  New  York  and 
eastern  market.  Yet  many  of  the  consumers  of  the  article 
are  ignorant  of  the  locality  of  the  work,  and  comparatively 
few  are  correctly  informed  of  its  real  character,  the  leading 
and  primary  object  of  its  construction,  or  the  consequences 
likely  to  flow  from  it,  either  in  relation  to  the  public  generally, 
or  the  stockholders  in  particular. 

The  Delaware  and  Hudson  canal  commences  at  Kings- 
ton, on  the  Hudson  river,  ninety  miles  above  New  York,  and 
extends,  in  a  southwest  direction,  through  Ulster,  Sullivan, 
and  Orange  counties,  in  that  state,  following  the  valleys  of 
the  Rondout,  Neversink,  and  Delaware,  to  the  mouth  of  the 
Lackawaxen  river,  in  Pike  county,  Pennsylvania,  thence  up 
that  river  to  the  junction  of  the  Dyberry  and  west  branch  of 
the  Lackawaxen,  at  Honesdale,  in  Wayne  county,  Pennsyl- 
vania. The  work  has  been  constructed  in  every  part  in  the 
best  manner ;  the  locks  and  culverts  on  the  first  sixty  miles 
are  built  of  stone,  laid  in  the  best  hydraulic  cement  mortar, 
and  the  acqueducts  are  either  entirely  of  stone  and  cement. 


BANKING  INSTITUTIONS  OF  THE  187 

or  wooden  trunks,  supported  by  stone  piers  and  abutments  of 
the  best  masonry.  On  the  uppper  forty-eight  miles  of  canal, 
the  locks  are  similar  in  every  respect,  except  that  the  walls 
are  of  dry  masonry,  with  wooden  chambers  to  make  them 
water  tight,  which  can  be  repaired  and  renewed  without  dis- 
turbing the  stone  work  of  the  lock,  and  at  a  season  of  the 
year  when  the  canal  is  closed  by  the  frost.  The  canal  is  one 
hundred  and  eight  miles  in  length,  fed  by  the  waters  of  the 
Rondout,  Neversink,  Mongaup,  Delaware,  and  Lackawaxen 
rivers,  all  large  and  permanent  streams,  affording  an  abun- 
dant supply  of  water  at  all  times.  The  locks  are  on  an  im- 
proved plan,  and  will  pass  a  boat,  including  the  filling  of  the 
lock,  in  less  than  four  minutes.  The  canal  is  thirty-six  feet 
wide  at  the  surface,  and  four  feet  deep.  The  locks  are  seventy- 
six  feet  long  between  the  gates,  nine  feet  wide,  and  from  eight 
to  eleven  feet  lift. 

A  railroad  of  sixteen  miles  connects  the  company's  coal 
mines  at  Carbondale  wTith  the  canal.  This  road  in  its  cha- 
racter is  new  in  this  country,  having  five  inclined  planes, 
worked  by  stationary  steam  engines,  either  of  which  will  pass 
seven  and  a  half  tons  of  coal  half  a  mile  in  eight  minutes, 
and  return  the  empty  wagons. 

This  improvement  in  its  whole  length,  has  been  critically 
examined  by  experienced  and  competent  judges,  and  with 
all  its  appendages,  of  aqueducts,  culverts,  waste  weirs,  slope 
walls  and  feeders,  has  been  pronounced  not  inferior  to  any 
in  the  country.  The  railroad  and  canal  were  both  in  opera- 
tion from  the  middle  of  April  to  the  15th  of  December  last, 
and  during  that  time  nothing  occurred  on  either  of  them  to 
interrupt  the  regular  course  of  business  for  more  than  six 
days  altogether. 

During  the  month  of  November,  heavy  rains  raised  the 
Lackawaxen  and  Delaware  rivers,  and  other  streams  with 
which  the  company's  works  are  connected,  much  beyond  any 
swell  that  had  taken  place  for  many  years.  The  flood  was 


188  UNITED  STATES'. 

moreover  sudden  as  well  as  great.  But  along  the  whole  line 
of  the  improvement,  the  damage  done  by  this  extraordinary 
and  sudden  freshet  did  not  exceed  fifteen  dollars.  No  better 
evidence  could  be  asked  or  given  of  the  stability  of  the  work. 

These  improvements  have  been  made  under  charters  from 
the  states  of  Pennsylvania  and  New  York,  which  are  as  libe- 
ral and  comprehensive  in  their  provisions  as  could  be  desired. 
No  restriction  or  limitation  is  imposed  upon  dividends,  except 
as  regards  the  railway,  where  the  tolls  are  required  to  be  so 
regulated  as  not  to  yield  more  than  twelve  per  cent,  on  the 
capital  expended  in  constructing  it.  The  company  is  per- 
mitted to  hold  five  thousand  acres  of  coal  land,  and  to  carry 
on  the  coal  business  without  limitation  or  restriction  as  to  the 
amount  of  capital  used  therein. 

The  company  are  the  proprietors  in  fee  of  between  three 
and  four  thousand  acres  of  coal  land,  selected  in  especial  re- 
ference to  its  own  operations  and  the  quality  and  quantity  of 
the  article,  and  therefore  undoubtedly  the  most  valuable  in 
that  section  of  the  country.  Unless  the  price  at  which  coal 
lands  have  been  selling  near  the  head  of  the  Schuylkill  na- 
vigation be  entirely  fictitious,  the  Delaware  and  Hudson 
Canal  Company  possess,  in  their  coal  lands  alone,  a  property 
of  immense  value.  They  also  own  the  sites  of  the  town  of 
Bolton,  at  the  eastern  termination  of  the  canal.  Port  Jarvis, 
at  the  point  where  the  canal  reaches  the  valley  of  the  Dela- 
ware river,  a  moiety  of  Honesdale,  at  the  head  or  west  end  of 
the  canal,  and  Carbondale,  at  the  mines.  No  inconsiderable 
amount  of  money  will  be  realized  from  the  sales  of  lots  in 
these  places,  especially  the  last  two. 

The  capital  of  the  company  employed  in  its  canal  and 
coal  operations  is  about  $2,300,000,  which  is  invested  as  fol- 
lows, namely : 

124  miles  of  canal  and  railroad. 

3500  acres  of  coal  lands,  town  plots,  and  banking  house. 
275  railroad  wagons. 


P,  AN  KING   INSTITUTIONS  OF  Till.  189 

130  canal  boats,  and  other  movable  property. 

$1,500,000  of  this  capital  is  supplied  by  a  stock  subscribed 
at  the  original  formation  of  the  company,  which  is  all  paid 
up. 

$500,000  is  a  loan  from  the  state  of  New  York,  at  five 
per  cent,  and  $300,000  at  4£  per  cent,  interest,  payable  in 
twenty  years  from  the  dates  of  the  loans  respectively. 

The  primary  and  leading  object  in  the  construction  of  this 
work  is  the  transportation  of  coal  from  the  Lackawanna  coal 
field  to  the  Hudson  river.  Aside  from  this  consideration, 
there  would  not  have  been  a  sufficient  inducement  for  such 
an  improvement,  although  it  is  not  to  be  doubted,  but  that  a 
large  amount  of  miscellaneous  business  will  be  done  upon  it. 
The  country  through  which  it  passes,  particularly  that  part 
of  it  in  Pennsylvania,  is  new,  and  susceptible  of  much  in- 
crease in  population  and  business.  Its  progress  in  improve- 
ment has  hitherto  been  retarded  for  want  of  an  outlet  to  mar- 
ket, which  this  canal  and  railway  now  furnish.  A  great 
and  decided  revolution  must  soon  take  place  both  in  the 
course  and  amount  of  trade  throughout  the  country  pene- 
trated by  these  improvements.  Of  the  rapidity  and  extent 
of  this  change,  some  notion  may  be  formed  by  the  fact,  that 
the  village  of  Carbondale,  (the  mines,)  which  according  to 
the  late  census  contains  a  population  of  upwards  of  six  hun- 
dred persons,  was,  three  years  ago,  a  solitary  spot  in  the  wil- 
derness, marked  by  a  single  log  hut.  At  the  same  time 
Honesdale  (the  head  of  the  canal)  was  covered  by  a  dense 
forest,  which  has  disappeared,  and  given  place  to  a  pleasant 
and  thriving  village,  enlivened  by  the  bustle  and  hum  of 
business,  and  but  little  inferior  in  population  to  Carbondale. 
The  railroad  approaches  within  twenty-two  miles  of  the  Sus- 
quehanna  river,  with  which  it  will  probably  at  a  future  day 
be  connected,  along  the  valley  of  the  Lackawanna.  The 
company  own  the  mines,  railway,  and  canal,  and  are  autho- 
rized to  carry  on  the  coal  trade,  and  use  as  much  capital 


190  U\TTED  STATES. 

therein  as  they  may  deem  necessary.  Unquestionably  they 
will  prosecute  the  business  to  the  full  extent  of  the  demand 
for  the  article.  Their  profit  or  dividends  will  depend  on  the 
sum  per  ton  which  it  will  cost  them  to  bring  the  article  to 
market,  the  price  which  they  can  obtain  for  it,  and  the  quan- 
they  they  can  sell.  The  capacity  of  the  railway  is  equal 
to  the  delivery  of  five  hundred  tons  per  day  of  twelve  hours, 
and  that  of  the  canal  to  six  hundred  thousand  tons  per  an- 
num. The  power  of  the  railway  may  be  increased  with  fa- 
cility, and  at  a  small  expense. 

From  the  landing  on  the  Hudson  to  New  York,  the 
transportation  cost  during  the  last  season  fifty  cents  per 
ton.  But  the  experiments  made  by  the  company  with 
the  Lackawanna  steam  towing  boat,  render  it  certain,  that 
the  expense  of  this  part  of  the  operation  may  be  reduced 
to  twenty-five  cents  per  ton.  Let  us  however  assume  the 
cost  of  the  article  to  the  company  at  $3  per  ton  at  the 
landing  on  the  Hudson.  Any  one  who  may  feel  suffi- 
cient interest  in  the  matter  to  inquire  of  the  officers  and 
agents  of  the  company,  will  find  that  this  assumption  ex- 
ceeds the  real  cost. 

Taking  the  quantity  of  coal  to  be  delivered  this  year  at 
only  eighty  thousand  tons,  and  the  price  at  the  very  reduced 
rate  of  $5  per  ton  at  Kingston,  the  net  profit  to  the  com- 
pany will  be 

$2  per  ton—or  on  80,000  tons,  $160,000 

Receivable  tolls  on  other  business,      -  25,000 



$185,000 

Interest  on  loans,  38,500 

Estimated  expense  of  repairs  )      3  6g 

and  superintendence,  ^ 

Leaving  for  dividend  on   $1,500,000  $116,500 

Which  is  equal  to  a  dividend  of  7  per  cent.  105,000 

Leaving  a  surplus  of  $11,500 


BANKING  INSTITUTIONS  OF  THE  191 

The  operations  of  the  company  may  be  extended  to 
the  delivery  of  one  hundred  and  fifty  thousand  tons  of  coal 
the  next  year,  without  the  least  difficulty,  and  the  cost  of 
mining1,  railroad  transportation,  and  freight,  may  be  re- 
duced fifty  cents  per  ton,  making  the  net  cost  of  the  coal 
at  Kingston,  two  dollars  and  fifty  cents  instead  of  three 
dollars,  the  present  cost.  But  to  assume  only  one  half  of 
that  saving,  and  the  cost  at  Kingston,  at  two  dollars  and 
seventy-five  pents,  and  the  selling  price  four  dollars  and 
seventy-five  cents,  with  only  an  increase  of  twenty  thousand 
tons  to  the  quantity  for  the  year  1832,  the  result  will  be  as 
follows  :  there  will  be  a  profit  of 

$2  per  ton,  which  on  100,000  tons  will  be  $200,000 

Receivable  tolls  on  other  business,  30,000 


230,000 
Repairs,  superintendence,  and  interest  on  loans,      68,500 


Leaving  for  dividend  on  $1,500,000  stock         161,500 
Equal  to  ten  per  cent.  150,000 


And  a  surplus  of  $  1 1 ,500 

The  canal  terminates  on  the  Hudson,  ninety  miles  above 
New  York,  and  sixty  below  the  city  of  Albany.  The 
whole  of  the  population  in  the  towns  and  counties  bor- 
dering on  the  North  river,  may  therefore  be  considered 
as  the  peculiar  and  exclusive  market  of  this  company. 
No  other  coal  of  which  we  have  any  knowledge,  can  pos- 
sibly maintain  or  attempt  a  competition  with  that  of  the 
Delaware  and  Hudson  Canal  Company,  in  this  section  of 
country.  This  will  be  conceded  at  once,  by  every  candid 
man  :  and  it  is  equally  certain,  that  the  quantity  required  for 
this  market,  will  be  very  considerable.  Their  winters  are  long 
and  severe.  The  forest  which  once  skirted  this  noble  river 
has  almost  entirely  disappeared.  In  the  North  river  towns, 
wood  is  therefore  an  expensive  article ;  in  Albany  it  costs 


192  UNITED  STATES. 

about  the  same  price  as  in  Philadelphia.  It  is  hauled  twelve 
miles,  to  Kingston  landing,  for  the  New  York  market.  To 
the  quantity  required  by  the  North  river  market,  may  safely  be 
added  no  inconsiderable  amount  for  the  population  bordering 
on  the  Erie  and  Champlain  canals  ;  so  that  in  fact  the  mar- 
ket open  to  this  company,  and  secured  to  it  exclusively  by  the 
termination  of  the  canal  on  the  North  river,  will  be  co-exten- 
sive with  the  inland  navigation  of  the  state  of  New  York. 
The  article  has  already  found  its  way  to  Utica. 


UNITED  STATES. 


193 


194 


BANKING  INSTITUTIONS  OF  THE 


rt^ 

II 


UNITED  STATES. 


195 


196 


BANKING   INSTITUTIONS  OF  THF. 


H 


:sg! 


Hi 


;§; 


e     « 


'— irj<i— «CX/QO 


c    .-<  en  c    <ro  t- 


(MCiOO 

r— <xnm<>» 


! 


£§g 


PI 


irri 


cT 
o  o  kn  o  CD  co  ro  en 

kntD-^fmCDCCCO^^ 


CO  CO  CO  CO  CO  CO  CO  CO  CO  < 


UNITEP  STATES. 


O  CO  i 

S£ 

00  ~  i 


o 


^  13  I  "£,"£.  ^'  "S, 

Al 


•g  I   I  o~g  *f  «"g- 


1^  to  o 

—i_iCM 


a 

«, 


of  Alb 
Bank, 
anics' 
iercial 


fll.lli 

„  S  >       «    -"c 


?  ^. 


'  > 


«  *         — 


g^^  gl 


198 


BANKING  INSTITUTIONS  OF  THE 


I 


a 


2 


UNITED  STATES. 


]99 


200 


BANK1NC,    INSTITUTIONS  OF  THE 


£'l 


•1 


>>>> 


o**-.  <=>      <=><=>docn 

<«j<O*O        •rPOl.-iCO 

co      "*      eo*»*«4 


3 


«C. 
5» 


^f<  0 

com 


a  G 


gg 


EH 
P 

O 

i— i 

EH 
O 
H 
55 

O 
O 


s      a*  is 

.^•3      -0  rt 
&,•§        «^ro 

|      'jj'ff 

o      aP  5^8  '     .1 

w     '2, •    §  fl     2-^ 
a-  S  -     v  ^ 


2.a 


s§ 


! 


II 


UNITED  STATES. 


201 


^e^fT^f—? 

' 


o 

— 

e 

w 


<— I  r-t  CO 


Ill 


§§§ 

COOJ  M 


g  « 


2 


CQ  -rTf^ 


26 


sag 


I 


202 


BANKING  INSTITUTIONS  OF  THE 


1- 


iSnoo 


O 

O 


- 


5:l 

•M 

&£* 


C  M- 

it 
II 


UNITED  STATF.fi, 


tf 


204 


BANKING  INSTITUTIONS  OF  THE 


& 


;2gg£888 


i 


I 


II 


UNITED  STATES. 


^ 


i  LO  O  O     I   O 

icn  ^c^ 

i 


IllMlllllllllllll 


:u 


OOOOOOOOOOOOOOO" 
O  O  O  O^O  OOOOOOOOOOi 


"o"o" 
,«o. 


w     ^^ 

C/2 

& 

E 

o 

<1  cu 

i 

<1 

*     fl! 

*  -.,  .'  .  ..''•  «  *s 

I     ^        ^ _       _   ;  ||jl 

1  rlltfil  -    '•«  '  a II 'I. 

iflfl3' 


206 


EH 
H 

W 
«} 

P 


r/2 

a 


BANKING  INSTITUTIONS  OF  THK 

IS     ^ 


si 


•a  « 

§'! 

s3 


§     o 


§  i 


I 
|, 


• 
fe    ' 


II 

«J   O 


il 


UNITED  STATES. 


207 


W 


ffi 
o 


II 


e 


11 

5    SJ 

^ 


\n co  TJ< -«j< co o 


«  ''  '' 


•fc 


I 

z   I 
2   I 


cTcTo 


a      c 

3        § 
O         o 


TO 

I.I 


§    I 

CU        Cu 

£      ~ 

80 
•  o 

I  I 
II 

l-'i 


42 
g 

•  -8 

Cf3 


I- 

•a 

il 


1  I 

-    K 
5      •  or  2     to  ' 

imiiiiiiiiiii 


i|il 

UliiL 


9  0 

ss 


208 


BANKING  INSTITUTIONS  OF  THE 


W. 


H 
02 

a 

o 

<1 

02 


UNITED  STATES. 


209 


KJ 
£ 

53 
a 


210 


BANKING  INSTITUTIONS  OF  THE 


i! 


(MOCOOCOO 


>  o  o 

)  O  O 

>oo 


o  m  kfj  o  in 


|0        O 

n<      co 
e4" 


g 


%,§ 

III 


W 
I 

<! 


i  *  at 

r?.         ?     -'C  o 


HI 


•**  i-      *M  W 

•a  g.|    g  8 
o    *«  ~n    "°  ^j» 

«    S*13    o--2 

fe-^J  is- 

S  11  ^§ 

M  J-l  s  ®        >•  "^ 

jrltKll 

I11S.|  1 


a 


g^M^J^ 

rt\     3     flN     TO  fc—t    ^>     rt\ 

2<JJg^g  *8 

r>     H         00^- 


UNITRD  STATF.S. 


W 

55 


" 


«sr 

^g 


a  -^ 

§S 


§• 


3    bfl—  .^J    &fl 

=  a         2 


"     I 


•fl 


.     - 


llflllijpi 

*o  £  <^  o  cK3  S  2  o  w  "" 
^^o^^Oi^  8Q«ii^^ 


212 


BANKING   INSTITUTIONS  OF  THE 


I 

>H 

^ 
^ 
^ 
w 

PL, 


Amount  of 
dividend. 


Time  and 
of  divide 


Amount  of 
capital. 


kO  O  O  O  O>  CO  i"-<  ^  O  H3  O^  r-H  O^ 


!£    SSi 

)  ^t*        O  O  < 


-^oooooooo 


- 
S  OO  O  ^  <>J  1 


O> 
(M  0s 


.  -Ss 
Is 


"^t1  o  o  o  ^n  t^-  o  ^ 


5a     I 


..        BX1J        S 

fc  •  .g-^'So  •  -"3 

EH  I  i  HI  E 

|I|J |--iH*-i 

lill 

d  isil •••••••    | rg>-  i 

§  !li! linn 

g   4-|§§.s  S  .M^s  .  .o 

•^   1  ^S"^  ^  i|s| 

rili?" """" 

^«"^u......        ......  -o^«isS«2.2 

o1-1^  oj.S  'o       g~ 


V! 


UNITED  STATKS. 

:§|g 

>  o  <x>  -*J<  GO  -jr1  o  o~j  CD        "-  o  o  o 

I  tO  ^  C*  i#  TT  CO         CO         g  ^MCO 


ft 

I* 


rcTo"o"o"< 


i— lO-^IMOOtOCO 


8S8S 


a7 


3    s'1 


i,, 


s' 


Ifitii 

Icg^^^^lS^ 


o  ^^ 

TT   g- 

1  §1 

•S2 

,    36 

rt  «$  a 
"S  '2  -5- 

511  s 

irn 

Illl 


213 


o      o 
o      o 


3' 


EC 


I  JIM 


S 

H<! 


214 


BANKING  INSTITUTIONS  OF  THE 


P 

§ 


*4 


Ci 
>iOO     CO 


03 


CO  N         CO     CO     C^COCOCO 

>-a  co_  ^  Q    £5    OOOQ 


CO     (MCOCOOt 


r-a  s§ss  i 

s--5    g§^§2 


s" 


a 

§  w 

g  I 

H  to 


S2  % 


UNITED  STATES. 


215 


JJ. 

-^co 


«J«   C« 

=Qfc<S 


*Ajrf*l| 

sillSjlI 

"J  §585  S«a 

'lo'"^ 


216 


3 

a 
3 

o 
o 


K- 

s^ 

i> 


S^i 


fed 

*% 


BANKING  INSTITUTIONS  OF  THE 

>  O     O  O  C<1  O  O  O  O    I   (M 

>  O     Ui^^OOOOO        O 


cT  10"  crT 

M     c4     S  ( 


1  1  IlilHI 


<M     CO  (M  W  <M  C^J  N  M 


)  l-O  ( 


iff     irTc 

I  s« 


8SS288§28§ 


SSS 


iltJSS^^ 


s 


vrTc^Tkri" 


£  a  i"  iHfs  sp 

CO        CD       r-l       tO«  O* 

g      s 


sfs1 


S  I 
S| 

S£ 


I 

o 

«a 

1'i 


a| 


111 

r<l  X 

8^| 

rt  §0 

§is 

§   *  S 

ial 

i3§3 

S3'C  fli 


^Z 

gg     Is 
Ss,     s.|-    •• 

C3  «  .  CS  g 

35,5    |§ 

^l-s  9s 

fliijiiii 

Illlligllll 


UNITED  STATES. 


ss 

8  5 

ll 

•^ 


o'Sv" 

«-  kTXM 


ii 


^    . 


4s 


^ 
3 

I-H 

o 
tf 

I-H 


s  c  c 

rt  d  rt 

^  >-»!-> 


Pf 


§§§ 


sj          £? 

iifli^ 


°'   'If    Htftfl     2' 

•I 


218 


BANKING  INSTITUTIONS  OF  THE 


2; 

I— I 
O 

£3 


S 


.-H"  Of 


o  o  o 

888 


S 


888 


tf> 


a  1^ 

o  BJSJ; 

o 


Is  s 

p 

«i» 


'I 


•ajf 

II 

TJ1© 
fc£ 

II 

S'o 

0>   X 

3* 

BS 


^« 


•s, 


^_       ^ 

§1  § 

^.    O    S-C 

.2  g-  S  o 

5|852B 

g'.ginj^ 

iiiff 


SJJfi 

SJ'S'S'T 


UNITED  STATIC 


1  I 


^2 
£1 


§ 

<j 
o 

ffl 

EH 

O 
c/2 


_fc   M       - 

CO(M   <u  COM 

c«o 
..<£>.. 

c  fl       s  a 
rt  rt       a  «s 


§§888 
§~8£8"8 

m  CD  co  o  c> 


&  i>  M  ^  o ' 

O>  T3  5?  •**   o  T3  C 

js  c^  >vc  a  c 
E-<1     «H<J 


220 


BANKING   INSTITUTIONS  OF  THC 


b 


o 

3 


3 

:  -2 


„ 


SJ 

••e 

4 


il 

I 


4* 


S 


d       cJ       d  .-* 

S       <u       o  ^ 

Q     Q     Q^ 


<o    . 

§3 


§ 


§      §      go 


a 

cT     ti      o 


> 


S     ^S tf     '> 

I  i'Kl'i 


niii  i 


ss, 

a'-s. 


,£^2 


H^Q 


i.cg^Kig 

i's§3|jfl 


«p  ^ 


r  KM  STA7 


'   « 
TaM 

'P 

•*s 


I 

g,ss 

5^2»S 
58 1| 

111 


. 


222 


BANKING   INSTITUTIONS  OF  THF. 


23 

s 

tf 
o 
w 
o 


II 

g  S 

^^ 


ufooof 


SO 


o  o  o  o> 

cTco"  o"  i-T 

d  ^t*  "^t1  to 

;O  i— I  CO  CO 

c*r  oF  *^* 


JOO 


8SS 


w  <*'   I 

0>  Oi 


. 

II 


«g  «  ^  «*  +»  'g  ^  tj  £ 

fKiifjfl 

s™ 


M  S3  g 


*8 


«| 

•^•a 


ST 


£-3 

3-2 


UNITED  STATES. 


o~<M"o"cr 
t--  — i  <M  •** 


>^  bb  bii  >> 

3532* 


C-^rQ  a 

l^^l 


8-8888 


o<  04  M<      c-* 


g  ^ 

t~-      c^« 

^  af 


223 


-  % 


224 


BANKING  INSTITUTIONS  OF  THE 


UNITED  STATES. 


225 


£ 


t~-  W  m  -4 

CO  I—  O  0<S 


§ 


1  *O  Ol  O  CD  "^  O  O 

>  o          c^  m  (>* 


s 


5.^e      o?o^S          c^^          ori^          SSj"1          S" 

SS^O^-^  CO  -H 


to  o  o          o  o ' 


I'CNI"         tD"o"cT 
i  o     •      t^  m  oo 


In 


o  m 


noo 

i§^2 


!§        g! 


18  S8 

PcT  »^"c5" 

10  n<o 

>  in  cs  i— ' 


226 


BANKING  INSTITUTIONS  OF  THE 


1 

EH 
P 


O 


i     2 


g 

CD" 


O  t-  <M  •* 


If 


OiCO  O  O 

r^co    .          o»n 

TJ<  CO  CO  \Q  *&  1O 


SC^i 
CO 

•^  CO 

cT         co~ 
c^ 


S  m  o          o< 

O  t"»  O*  CO  ( 


§ 


"o" 


t-"o"m" 


§ 


CO" 


rirTo"       t^o  i 

'  co  c^  m  c^i  i 


S      1 


a*    .1 


3 
8" 


r  g  -II 

S     S     o  I* 
3     Q      «J 


o 


I 

£ 

V 


II 


o"^ 

el 
fll 

«hSfc 


ll 


UNITED  STATIC. 

CO  CO  ^f 


C  J 


s"af 


111 


S3S 


§00  ^, 

.33       S! 


g 


Sis     ii 


>  CM  »n          cscoooi          ^< 


"         o*         ofcTcr         i>To*' 
J          »o          ooioc^          tooc 

O  t^«»  00  CO  ^t1  CO  ^* 


fwT 
3 


§ 


t-  » 

CT3 


cfo"o"o"         o~o 

C^  O  00  O  O  O 


22$ 


BANKING  INSTITUTIONS,  &C. 


5 


O 
ia 


cf 


B^8 


ill 


8! 


o"o 


o  vn  i 

iO  CD  ' 
•^(Ml 


I 

1 

gf  • 

3 


£88 

ofcTcT 

888 

-T     rf 


1 

a- 
•3 


<! 

g 

& 

53 

i>! 

CAROL 

s  . 

i  ' 

O 

1 

w 
•—. 

•  •  ^ 

1 
s 

i. 

i't 

1' 

g  _ 

S  •  •  ' 

1 

i 

•  -6    •  • 

|f 

.   s 

* 

1 

il 

•ST3"G, 

>ss. 

Tj-Ou, 

JfWj 


:9       in 

oo  2  Eo  O 

'^     cSss 


III 


«s 

II 

J°? 
•s 

s| 

e* 
to! 


ELEMENTS  OF   EXCHANGE 


WITH  THE   REGULATION  OF 


BILLS  AND  PROMISSORY  NOTES, 

IN  ENGLAND  AND  THE  UNITED  STATES. 
FROM  KELLY'S  CAMBIST. 


ELEMENTS  OF  EXCHANGE. 


1.— BILLS  OF  EXCHANGE. 

A  BILL  of  exchange  is  a  written  order  for  the  payment  of 
a  certain  sum  of  money  at  an  appointed  time.  It  is  a  mer- 
cantile contract,  in  which  four  persons  are  mostly  concerned, 
viz. 

1. — The  drawer,  who  receives  the  value,  and  is  also  called 
the  maker  and  seller  of  the  bill. 

2. — His  debtor  in  a  distant  place,  upon  whom  the  bill  is 
drawn,  and  who  is  called  the  drawee.  He  is  also  called  the 
acceptor,  when  he  accepts  the  bill,  which  is  an  engagement  to 
pay  it  when  due. 

3. — The  person  who  gives  value  for  the  bill,  who  is  called 
the  buyer,  taker,  and  remitter. 

4. — The  person  to  whom  it  is  ordered  to  be  paid,  who  is 
called  the  payee,  and  who  may,  by  indorsement,  pass  it  to 
any  other  person. 

Most  mercantile  payments  are  made  in  bills  of  exchange, 
which  generally  pass  from  hand  to  hand,  until  due,  like  any 
other  circulating  medium  ;  and  the  person  who  at  any  time 
has  a  bill  in  his  possession,  is  called  the  holder. 

When  the  holder  of  a  bill  disposes  of  it  he  writes  his  name 
on  the  back,  which  is  called  indorsing  ;  and  the  payee 
should  be  the  first  indorser.  If  the  bill  be  indorsed  in  favor 
of  any  particular  person,  it  is  called  a  special  indorsement, 
and  the  person  to  whom  it  is  thus  made  payable  is  called  the 
indorsee,  who  must  also  indorse  the  bill  if  he  negotiates  it. 
Any  person  may  indorse  a  bill,  and  every  indorser  (as  well 


232  ELEMENTS  OF  EXCHANGE. 

as  the  acceptor  or  payee)  is  a  security  lor  the  bill,  and  may 
therefore  be  sued  for  payment. 

The  term  of  a  bill  varies,  according  to  the  agreement  be- 
tween the  parties,  or  the  custom  of  countries.  Some  bills 
are  drawn  at  sight ;  others  at  a  certain  number  of  days  or 
months  after  sight  or  after  date  ;  and  some  at  usance,  which 
is  the  customary  or  usual  term  between  different  places. 

Days  of  grace  are  a  certain  number  of  days  granted  to 
the  acceptor  after  the  term  of  a  bill  is  expired.  In  the  British 
dominions  three  days  are  allowed. 

In  reckoning  when  a  bill,  payable  after  date,  becomes  due, 
the  day  on  which  it  is  dated  is  not  included  ;  and  if  it  be  a 
bill  payable  after  sight,  the  day  of  presentment  is  not  in- 
cluded. When  the  term  is  expressed  in  months,  calendar 
months  are  understood  ;  and  when  a  month  is  longer  than 
the  succeeding,  it  is  a  rule  not  to  go,  in  the  computation,  into 
a  third  month.  Thus,  if  a  bill  be  dated  the  28th,  29th,  30th, 
or  31st  of  January,  and  payable  one  month  after  date,  the  term 
equally  expires  on  the  last  day  of  February,  to  which  the 
days  of  grace  must,  of  course,  be  added  :  and,  therefore  the 
bill  becomes  due  on  the  3d  of  March. 

No  bill  of  exchange  drawn  in  Great  Britain  or  Ireland  can 
be  negotiated,  presented  for  payment,  or  in  any  way  admit- 
ted as  good  in  these  countries,  that  is  not  written  on  a  proper 
stamp  ;  and  any  person  drawing,  accepting,  or  paying  such 
a  bill,  is  liable  to  a  penalty. 

LAWS  OF  EXCHANGE. 

The  following  laws  have  been  selected  from  the  first  le- 
gal authorities,  and  likewise  examined  and  approved  by  se- 
veral experienced  merchants,  bankers,  and  notaries ;  and 
though  these  laws  apply  chiefly  to  the  British  dominions,  yet 
they  do  not  differ  essentially  from  the  regulations  of  other 
commercial  countries,  with  respect  to  accepting  indorsing, 
paying,  protesting ',  and  recovering,  bills.' 


ELEMENTS  OF  EXCHANGE. 


A<  •«    KPT1NG   BILLS. 


233 


When  a  bill  is  piesented  for  acceptance,  it  is  generally  left 
until  tlie  next  day,  and  the  common  way  of  accepting  is,  for 
the  drawee  to  write  his  name  at  the  bottom,  or  across  the 
body  of  the  bill,  with  the  word  accepted.  An  acceptance 
however,  in  a  slighter  way,  has  been  heretofore  deemed  bind- 
ing ;  thus,  had  the  drawee  written  his  name  upon  any  part 
of  the  bill,  or  the  initials  of  his  name,  or  the  day  of  the 
month,  or  merely  the  word  accepted^  he  was  considered  lia- 
ble :  but,  by  an  act  of  parliament,  passed  in  1819,  it  was 
declared,  -'that  no  person  shall  be  bound  or  charged  as 
acceptor  of  an  inland  or  foreign  bill  of  exchange,  otherwise 
than  by  an  acceptance  of  such  bill  of  exchange  written  there- 
on, or  on  some  OEC  part  of  such  bill,  if  the  same  shall  con- 
sist of  more  than  one  part." 

When  two  or  more  persons  are  in  partnership,  the  accept- 
ance of  one  binds  all  the  others,  if  the  bill  concerns  their 
joint  trade  ;  but  if  it  should  be  made  known  to  the  person 
Avho  recives  the  bill,  that  it  concerns  the  acceptor  only  in  a 
distinct  interest,  he  alone,  as  acceptor,  can  be  sued. 

A  clerk,  or  servant,  may  accept  a  bill  for  his  master,  when 
he  has  authority  for  that  purpose,  or  if  he  usually  transacts 
business  of  this  nature  for  him  ;  and  his  acceptance  binds  the 
master. 

But  if  the  bill  be  drawn  nominally  on  the  servant,  direct- 
ing him  to  place  it  to  the  account  of  his  master,  and  if  the 
servant  should  accept  it  generally,  without  specifying  that  he 
does  it  for  his  master's  account,  the  acceptance  binds  the  ser- 
vant only,  and  not  his  employer. 

When  a  bill  is  drawn  for  the  account  of  a  third  person,  and 
is  accepted  as  such,  and  he  fails  without  making  provision 
for  its  payment,  the  acceptor  must  discharge  the  bill,  and  can 
have  no  recourse  against  the  drawer. 

A  bill  may  be  accepted  to  be  paid  at  a  longer  period  than  is 
mentioned  in  the  bill,  or  to  pay  a  part  of  the  sum  only  :  such 
an  acceptance  is  binding  on  him  who  makes  it ;  but  the 

30 


234  ELEMENTS  OF  EXCHANGE. 

holder  is  at  liberty  to  take  it  as  it  is  offered,  or  to  act  as  if  ac- 
ceptance had  been  entirely  refused. 

The  acceptance  may  direct  payment  to  be  made  at  a  place 
different  from  that  mentioned  in  the  bill,  as  at  the  house  of  a 
banker  ;  in  which  case,  if  the  holder  should  neglect  to  de- 
mand payment  within  a  reasonable  time,  and  the  banker 
should  afterwards  fail,  the  holder  must  sustain  the  loss. 

When  a  bill  has  been  once  accepted,  the  acceptance  can- 
not be  revoked,  though  the  drawer  should  be  found  to  have 
failed  before  the  date  of  the  acceptance. 

INDORSING  BILLS. 

Bills  payable  to  bearer  are  transferred  by  simple  delivery, 
and  without  any 'indorsement ;  but  in  order  to  transfer  a  bill 
payable  to  order,  the  holder  must  express  his  order  of  paying 
to  another  person,  which  is  always  done  by  an  indorsement. 

An  indorsement  may  be  blank  or  special.  A  blank  in 
dorsement  consists  only  of  the  indorsees  name,  and  the  bill 
then  becomes  transferable  by  simple  delivery  ;  a  special  in- 
dorsement orders  the  money  to  be  paid  to  some  particular 
person,  or  to  his  order  :  a  blank  indorsement  may  always  be 
filled  up  with  any  person's  name,  so  as  to  make  it  special. 

An  indorsement  may  take  place  at  any  time  after  the  bill 
is  issued,  even  after  the  day  of  payment  is  elapsed. 

A  person  who  receives  a  bill  with  a  blank  indorsement  may 
take  it  as  indorsee,  negotiate  it  again,  or  demand  payment  on 
his  own  account,  or  he  may  receive  the  money  as  agent,  or 
for  the  account  of  the  indorser  ;  and  the  latter,  notwithstand- 
ing his  indorsement,  may  still  appear  as  holder  in  an  action 
against  the  drawer  or  acceptor. 

A  special  indorsement  need  not  contain  the  words,  to  order  ^ 
and  the  bill  is  negotiable ;  it  may  also  be  restrictive,  giving 
authority  to  the  indorsee,  to  receive  the  money  for  the  in- 
dorser, but  not  transfer  tiie  bill  again  to  another. 

An  indorsement  for  part  of  the  money  only  is  not  valid, 
except  with  regard  to  him  who  makes  it ;  the  drawer  and  ac- 
ceptor are  not  bound  by  it. 


KI.KMK.YT.->'    (>K    K.Vri!  AX(;K.  235 


When  the  holder  of  a  hill  dies,  his  e.\eniU>rs  may  indorse 
it  ;  but,  by  so  doing,  they  become  answerable  to  their  indor- 
see personally,-  and  not  as  executors. 

PAYING  BILLS. 

Bills  should  be  presented  for  payment,  as  well  as  for  ac- 
ceptance, during  the  usual  hours  of  business,  which  are  gene- 
rally considered  to  be  from  nine  o'clock  in  the  morning  till 
six  in  the  evening.  The  common  mode  of  payment  among 
merchants  is  by  a  draft  on  a  banker  for  the  exact  amount  of 
the  bill,  and  signed  by  the  drawee;  but  any  paper  whatever 
may  be  refused,  except  Bank  of  England  notes  :  and  the 
Bank  receives  no  other, 

PROTESTING  BILLS, 

When  acceptance  or  payment  has  been  refused,  the  holder 
of  the  bill  should  give  regular  and  immediate  notice  to  all  the 
parties  to  whom  he  intends  to  resort  for  payment  ;  and  if,  on 
account  of  unnecessary  delay,  a  loss  should  be  incurred  by 
the  failure  of  any  of  the  parties,  the  holder  must  bear  the 
loss, 

With  respect  to  the  manner  in  which  notices  of  non-ac- 
ceptance or  non-payment  are  to  be  given,  a  difference  exists 
between  inland  and  foreign  bills. 

For  foreign  bills  a  protest  is  indispensably  necessary  :  thus 
a  public  notary  is  to  appear  with  the  bill,  and  to  demand 
either  acceptance  or  payment;  and  on  being  refused,  he  is  to 
draw  up  an  instrument,  called  a  protest,  expressing  that  ac- 
ceptance or  payment  has  been  demanded  and  refused,  and 
that  the  holder  of  the  bill  intends  to  recover  any  damages 
which  he  may  sustain  in  consequence.  This  instrument  is 
admitted,  in  foreign  countries,  as  a  legal  proof  of  the  fact. 

The  protest  on  a  foreign  bill  should  be  made  in  time  to  be 
sent  off  on  the  next  post  day  to  the  place  where  it  was  drawn 
or  negotiated  ;  and  if  it  be  for  non-payment,  the  bill  must  he 
sent  with  the  protest. 


ELEMENTS   OF   EXCHANGE. 

As  to  inland  bills,  a  protest  is  not  absolutely  necessary  to 
entitle  the  holder  to  recover  the  amount  of  the  bill  from  the 
drawer  or  indorsee:  it  is  sufficient  that  he  give  notice,  by  let- 
ter or  otherwise,  that  acceptance  or  payment  has  been  re- 
fused, and  that  he  does  not  mean  to  give  credit  to  the 
drawee. 

According  to  the  practice  of  the  London  merchants,  a  pro- 
test is  hardly  ever  made  for  non-acceptance  of  an  inland  bill ; 
it  is  only  noted,  and,  if  not  paid  when  it  becomes  due,  it  is 
then  protested  for  non-payment.  Notice,  however,  must  be 
given  of  the  non-acceptance  and  noting,  otherwise  the  holder 
takes  the  risk  upon  himself:  and  if  the  protest  for  non-pay- 
ment should  be  omitted,  the  holder  cannot  recover  either  da- 
mages or  interest,  but  merely  the  amount  of  the  bill. 

If  the  person  who  is  to  accept  has  absconded,  or  cannot  be 
found- at  the  place  mentioned  in  the  bill,  protest  is  to  be  made 
in  the  same  manner  as  if  acceptance  had  been  refused. 

When  an  original  bill  is  lost,  and  another  cannot  be  had 
of  the  drawer,  a  protest  may  be  made  on  a  copy  ;  but  if  a 
bill  left  for  acceptance  be  lost,  the  person  with  whom  it  was 
left  must  bind  himself  to  payment,  or  else  a  protest  may  be 
made  out  immediately. 

It  is  customary,  as  a  precaution  against  accident  or  mis- 
carriage, to  draw  three  copies  of  a  foreign  bill,  and  to  send 
them  by  different  posts.  They  are  denominated  the  first, 
second,  and  third  of  exchange  ;  and  when  any  one  of  them 
is  paid,  the  rest  become  void,  and  of  no  value. 

When  the  acceptor  of  a  bill  becomes  insolvent,  or  absconds 
before  the  term  of  payment  is  expired,  the  holder  may  cause 
a  notary  to  demand  better  security,  and,  on  that  being  re- 
fused, to  protest  the  bill  for  want  of  it.  In  such  cases,  how- 
ever, the  most  general  practice  is  to  wait  the  regular  time  till 
the  bill  becomes  due. 

The  damages  incurred  by  non-acceptance  and  non-pay- 
ment, besides  interest,  consist  usually  of  the  exchange,  re- 
exchange,  commission,  and  postage,  together  with  the  ex- 


K I .  KM  !•-,  N T H   O I •'    !•;  \  T  1 1  \  \ < ,  K .  287 

pense?  of  protest  and  interest.      The  exchange  is  reckoned 

accord  ing  to  the  course  at  sight,  from  the  place  where  the 

protest  is  made  to  the  place  where  the  bill  is  to  be  paid  by 

fie  drawer  ;  and  if  it  be  not  paid  there,  the  re-exchange  is 

hen  reckoned  from  the  same  place  to  that  where  the  bill  is 

paid,  and  also  double  commission.     The  interest  commences 

from  the  day  when  the  demand  was  made. 

After  a  bill  has  been  protested  it  is  sometimes  accepted  by 
a  third  person,  to  save  the  reputation  of  the  drawer,  or  of  an 
indorscr  ;  such  an  acceptance  is  called  an  acceptance  supra 
protest.  The  acceptor  then  must  appear  in  person,  with  wit- 
nesses, before  a  notary,  and  declare  that  he  accepts  it  for  the 
honor  of  such  a  person,  and  subscribe  the  bill  thus — Ac- 
cepted, supra  protest,  in  honor  of,  &c. 

The  same  may  happen  when  the  person  on  whom  a  bill  is 
drawn,  having  doubts  about  the  drawer,  protests  it,  but  after- 
wards accepts  it  for  the  honor  of  one  of  the  indorsers  ;  in  this 
case  the  protest  must  be  sent  to  the  said  indorser  without  de- 
lay. 

The  person  for  whose  honor  a  bill  was  accepted,  must  re- 
imburse the  acceptor  the  amount  of  the  bill,  commission,  and 
other  charges,  even  though  the  acceptance  should  have  taken 
place  without  his  knowledge.  If  such  a  person  approves  of 
the  acceptance,  the  bill  may  be  paid  without  any  further  pro- 
test |  but  if  he  should  return  no  answer,  or  express  his  dis- 
approbation of  the  acceptance,  the  bill  must  be  formally  pro- 
tested for  non-payment  against  him  to  whom  the  bill  was  di- 
rected ;  and,  on  his  persisting  to  refuse  payment,  the  ac- 
ceptor may  safely  pay  it  for  his  account,  as  he  can  recover 
the  amount. 

RECOVERING  RILLS. 

The  drawer,  acceptor,  and  every  indorser  of  a  bill,  are 
equally  liable  to  the  payment  of  it ;  and  though  the  holder 
can  have  but  one  satisfaction,  yet,  until  such  satisfaction  is 
actually  had,  he  may  sue  any  of  them,  or  all  of  1  hem,  either 


I.I.KMKiYTS   (>F    KXC 

at  the  same  time  or  in  succession,  and  obtain  judgment 
against  them  all  till  satisfaction  be  made.  Proceedings  cannot 
be  staid  in  any  action,  but  on  payment  of  the  debt  and  of  the 
costs,  not  only  in  that  action,  but  in. all  the  others  in  which 
judgment  has  not  been  obtained ;  and  though  the  principal 
sum  should  be  paid  by  one  of  the  parties,  still  costs  may  be 
recovered  in  the  several  actions  against  the  others. 

When  acceptance  is  refused,  and  the  bill  is  returned  by 
protest,  an  action  may  be  commenced  immediately  against  the 
drawer,  though  the  regular  time  of  payment  be  not  arrived. 
His  debt,  in  such  a  case,  is  considered  as  contracted  the  mo- 
ment the  bill  is  drawn  :  thus;  if  before  the  bill  is  returned, 
the  drawer  should  become  a  bankrupt,  the  debt  was  con- 
tracted before  the  commission  of  bankruptcy  took  place. 

Nothing  will  discharge  an  indorser  from  his  engagement 
but  the  absolute  payment  of  the  money  ;  not  even  a  judgment 
recovered  against  the  drawer,  or  any  previous  indorser,  or  an 
execution  against  any  of  them,  unless  the  money  be  paid  in 
consequence. 

The  holder  of  a  bill,  in  order  to  entitle  himself  to  re- 
cover against  an  indorser,  needs  not  show  that  he  has 
made  a  previous  attempt  to  recover  from  the  drawer,  and 
this  holds  good  with  regard  to  inland  as  well  as  foreign 
bills. 

If  any  bill  happens  to  be  lost  within  the  time  limited  for 
payment,  the  drawer  is  to  give  another  of  the  same  tenor 
with  the  first ;  the  person,  however,  to  whom  this  new  bill 
is  delivered,  must  give  security  to  indemnify  the  drawer 
against  all  persons  whatsoever,  in  case  the  lost  bill  should  be 
found. 

When  a  person  has  indorsed  a  bill,  and  it  is  re-indorsed  to 
him,  he  cannot  maintain  an  action  against  the  person  to 
whom  he  indorsed  it. 

He  that  has  accepted  and  duly  paid  a  bill,  without  having 
in  his  hands  any  effects  of  the  drawer,  may  recover  in 


KLKMKNTS  OF   MX CHANGE.  239 

an  action  tor  money  paid  ami  laid  out  for  the  use  oi  tin- 
drawer. 

In  an  action  against  the  acceptor  of  a  bill,  it  is  a  general 
rule  that  the  drawers  handwriting  is  admitted,  because  the 
acceptor  is  always  supposed  to  be  acquainted  with  the  hand- 
writing of  the  person  whose  bill  he  accepts.  But  if  the  same 
bill  has  been  indorsed,  the  handwriting  of  the  indorser  or  in- 
dorsers  must  be  proved ;  in  case  of  a  blank  indorsement,  how- 
ever, the  handwriting  of  the  first  indorser  is  sufficient.  The 
same  takes  place  in  an  action  by  an  indorser-  against  the 
drawer. 

Proof  of  the  signature  of  a  servant  is  sufficient  to  bind  the 
master,  when  it  is  proved  that  the  servant  has  authority  to 
draw,  accept,  or  indorse  bills  in  his  master's  name ;  and  a 
subsequent  assent  is  considered  as  evidence  of  such  authority. 
A  general  custom  of  the  servant's  signature  and  the  payment 
of  the  master  is  likewise  a  sufficient  proof  of  the  general  au- 
thority ;  and  this  will  continue  to  bind  the  master  until  his 
determination  to  the  contrary  can  be  generally  known. 

PROMISSORY  NOTES. 

Promissory  notes  are,  in  general,  considered  in  the  same 
light  as  inland  bills  of  exchange ;  the  resemblance  between 
them  is  greatest  when  a  promissory  note  is  indorsed  •  for  such 
an  indorsement  is  an  order  to  the  maker  of  the  note  to  pay 
the  sum  mentioned  in  it  to  a  third  person.  Thus  the  first  in- 
dorser of  the  note  corresponds  to  the  drawer  of  the  bill,  and 
the  maker  to  tbe  acceptor ;  and  in  that  sense  all  the  laws  re- 
lating to  bills  of  exchange  may  be  applied  to  promissory 
notes ;  and  they  have  the  same  allowance  of  three  days 
grace  for  payment. 

When  the  form  of  a  bill  or  promissory  note  is  incontesta- 
bly  good,  the  law  is  the  same  for  both  ;  yet  a  note  may  be 
valid  in  some  cases  when  a  billed  exchange  is  not  so ;  thus 
a  promissory  note  can  be  made  payable  out  of  a  particular 
fund,  then  within  the  power  of  the  drawer  ;  neither  is  it  ne- 


240  ELEMENTS  OF  EXCHANGE. 

cessary  that  the  time  of  payment  of  a  note  should  be  abso- 
lutely fixed ;  thus,  notes  have  been  held  to  be  good  which 
were  payable  at  a  certain  person's  death,  or  after  such  a  ship 
should  be  paid  off;  in  short,  at  the  period  of  an  event  phy- 
sically or  morally  certain ;  but  should  the  payment  depend 
on  a  contingency  which  may  never  happen,  as  if  it  were 
payable  when  such  person  should  marry,  the  note  cannot  be 
accounted  good. 

BONDS. 

A  bond  for  money  is  a  higher  security  than  a  bill  of  ex- 
change or  a  promissory  note,  as  it  binds  the  giver,  his  heirs, 
and  lands,  in  the  first  instance ;  whereas  bills  and  notes 
attach  only  on  personals ;  and,  in  case  of  death,  a  bond, 
as  a  specialty  under  seal,  is  paid  before  simple  contract  debts, 
which  bills  and  notes  are  considered  to  be. 

A  bond  may  be  transferred  by  a  deed  of  assignment,  but 
not  by  indorsement,  and  therefore  it  is  not  deemed  a  negotia- 
ble security,  like  a  bill  of  exchange  or  a  promissory  note.  In 
foreign  countries,  however,  bills  of  exchange  only  are  bind- 
ing, as  before  noticed. 

BILLS,  BONDS,  AND   NOTES,  HOW  VOID. 

It  should  be  observed  that  the  foregoing  laws  apply  only  to 
debts  legally  contracted.  For  no  bill,  note,  or  bond,  made 
by  a  bankrupt,  or  by  an  insane  person,  can  be  valid ;  neither 
by  a  minor,  nor  a  married  woman,  except  in  a  few  particular 
cases.  Neither  is  any  bill,  note,  or  bond  binding  when  the 
whole,  or  any  part  of  the  consideration  shall  be  for  money, 
or  other  valuable  thing,  won  by  gaming  or  betting,  or  lent 
knowingly  for  such  purposes  ;  or  for  money  lent  on  usury  ; 
that  is  at  more  than  the  legal  interest,  which  is  five  per  cent, 
per  annum. 

DRAFTS  ON  BANKERS. 

Drafts  and  checks  on  bankers  are  generally  received  by 
merchants  as  ready  cash ;  and  if  the  party  receiving  them 


ELEMENTS  OF  EXCHANGE.  241 

should  not,  within  a  reasonable  time,  demand  payment,  he 
must  bear  the  loss  in  case  the  banker  or  drawer  should  fail  in 
the  interim  :  but  what  shall  be  deemed  a  reasonable  time  has 
not  been  precisely  fixed,  as  it  must  depend  on  situation  ;  and, 
therefore,  whenever  it  becomes  a  question  of  law,  it  is  left  to 
the  jury,  or  court,  to  decide  according  to  the  circumstances  of 
the  case.  The  general  practice  is  to  present  checks  for  pay- 
ment on  the  day  they  are  received  or  dated,  and  during  the 
hours  of  banking  business,  which  are  from  nine  o'clock  in 
the  morning  to  five  in  the  afternoon. 

If  a  check  on  a  banker  be  refused  payment,  he  who  gave  it 
is  bound  to  make  it  good  ;  and  if  it  be  lost,  he  must  also 
make  it  good,  on  receiving  a  satisfactory  security  that  the 
lost  draft  will  not  appear  against  him. 

As  a  precaution  against  loss,  it  is  customary  to  write  across 
a  draft,  as  soon  as  received,  the  firm  of  the  house  into  which 
it  is  to  be  paid  ;  by  which  may  be  understood  that  it  will  not 
be  paid  to  any  other  house  or  person  without  proper  inquiry. 
This  practice  is  also  useful  in  clearing. 

Clearing  is  a  method  adopted  by  London  bankers  for  ex- 
changing drafts  and  bills  on  each  other's  houses,  as  they  be- 
come due,  and  settling  the  differences.  This  important  ope- 
ration is  performed  daily,  at  an  office  called  the  Clearing 
House,  with  great  correctness  and  dispatch,  and  with  such 
method,  that  bills  and  drafts  to  the  amouut  of  £5,000,000  on 
an  average  are  canceled  at  each  clearing,  with  less  than  one 
twentieth  part  of  that  sum  in  Bank  of  England  notes. 

Clearing,  though  of  modern  adoption  in  England,  has 
been  long  practiced  in  other  countries,  particularly  in  settling 
bills  of  exchange,  and  other  documents  of  credit,  at  the 
great  fairs  on  the  continent.  The  invention  of  this  method 
is  ascribed  to  the  Florentines,  but  the  practice  has  been  greatly 
improved  by  the  London  bankers. 


242  ELEMENTS  OF  EXCHANGE. 


PRINCIPLES  OF  EXCHANGE. 

INLAND  EXCHANGE. 

By  inland  exchange  is  understood  the  act  of  remitting  bills 
to  places  in  the  same  country ;  by  which  means  debts  are 
discharged  more  conveniently  than  by  cash  remittances. 

Suppose  for  example,  A,  of  London,  is  creditor  to  B,  of 
Edinburgh,  £100 ;  and  0,  of  London,  debtor  to  D,  of  Edin- 
burgh, £100  ;  both  these  debts  may  be  discharged  by  means 
of  one  bill.  Thus,  A  draws  for  this  sum  on  B,  and  sells  his 
bill  to  C,  who  remits  it  to  D,  and  the  latter  receives  the 
amount  when  due  from  B.  Here,  by  a  transfer  of  claims,  the 
London  debtor  pays  the  London  creditor,  and  the  Edin- 
burgh debtor  the  Edinburgh  creditor,  and  no  money  is 
sent  from  one  place  to  the  other.  The  same  would  take 
place  if  D,  of  Edinburgh,  drew  on  C,  of  London,  and  sold 
his  bill  to  B,  of  Edinburgh,  who  should  send  it  to  A,  of  Lon- 
don ;  the  effect,  in  either  case,  being  mereljr  a  transfer  of 
debtors  and  creditors.* 

By  the  foregoing  example,  it  appears  that  reciprocal  and 
equal  debts,  due  between  two  places,  may  be  discharged  with- 
out remitting  specie ;  and  it  may  be  supposed,  that  such  aw 
operation  is  of  equal  convenience  to  all  parties  concerned  :  but 
when  the  debts  are  unequal  the  advantage  must  be  different, 
as  the  obligation  of  remittance  is  no  longer  mutual, because  the 
debtor  place  must  pay  its  balance  either  by  sending  cash  ov 
bills  ;  and  as  the  latter  mode  is  generally  preferred,  an  in 
creased  demand  for  bills  must  be  the  consequence,  which  en- 
hances their  price,  as  it  would  that  of  any  other  article  of  sale 
or  purchase- 

This  is  the  plain  principle  of  exchange,  and  is  constantly 
exemplified  in  the  premium  paid  for  inland  bills  on  London. 

*  In  this  operation  A  is  the  drawer  and  seller,  B  the  drawee  and  acceptor, 
C,  the  buyer  and  remitter,  and  D,  the  payee,  if  his  name  be  mentioned  in  the 
bill,  and  he  is  the  holder  when  he  receives  the  bill  from  A.  When  D,  or  any 
other  holder  presents  the  bill  for  acceptance  or  payment,  he  is  called  the  pre- 
senter. 


KLKMF.NT*   «»F   l :  \  t  •  11  A  NCK.  243 

which  is  the  grand  emporium  of  commerce  that  furnishes 
most  other  places  in  the  kingdom  with  foreign  merchandise  ; 
and  heing  also  the  seat  of  government,  to  which  the  revenue 
is  transmitted,  and  the  residence  of  numerous  landlords, 
whose  rents  must  be  remitted  to  them  from  the  country,  it 
has  generally  a  large  balance  of  debt  in  its  favor  ;  and  as  this 
balance  is  usually  paid  in  bills,  a  demand  for  them  is  created, 
and  therefore  a  premium  is  the  consequence. 

The  premium  on  inland  bills  is  mostly  commuted  for  time ; 
that  is,  for  a  certain  number  of  days  after  date  or  after  sight, 
which  varies  according  to  circumstances.  Thus,  the  general 
term  for  bills  from  Edinburgh  on  London  is  forty  days'  date, 
which  is  valued  at  about  £  per  cent.,  and  is  called  the  par 
date.  A  similar  premium,  or  date,  is  allowed  for  bills  on 
London  drawn  in  all  other  distant  parts  of  Great  Britain  ;  but 
bills  at  sight,  on  any  of  those  places,  may  be  generally  had 
in  London  without  any  premium.  Thus,  the  inland  ex- 
change is  constantly  in  favor  of  the  capital ;  and  the  date 
term  varies  according  to  the  greater  or  less  demand  for  bills. 

FOREIGN  EXCHANGE. 

The  principle  of  foreign  exchange  is  the  same  as  that  of 
inland,  with  respect  to  settling  accounts  by  a  transfer  of 
claims,  and  also  by  the  premium  or  price  of  bills  being  regu- 
lated by  the  proportion  which  exists  between  the  demand 
and  supply  :  but  the  manner  of  paying  the  premium  for  fo- 
reign bills  differs,  and  the  operation  is  more  complex,  owing 
to  the  denominations  of  money  not  being  the  same  :  for,  in 
this  case,  the  value  of  bills  is  estimated  by  the  comparative 
rate  of  moneys  ;  and  the  date  is,  besides,  taken  into  conside- 
ration. 

In  foreign  exchange  one  place  always  gives  another  a 
fixed  sum  or  piece  of  money  for  a  variable  price;  the  former 
is  called  the  certain  price,  and  the  latter  the  uncertain  price, 
that  is,  the  £  sterling  for  a  variable  number  of  francs ;  and 
to  Spain  the  uncertain  for  the  certain,  that  is.  a  variable 


244  Ef.KMENTS   OF   F.XCH  AN«K. 

number  of  pence  sterling  for  the  dollar  of  exchange.  The 
uncertain  price,  as  quoted  at  any  time,  is  called  the  rate,  or 
course  of  exchange. 

When  the  demand  in  London  for  bills  on  Paris  is  great,  a 
smaller  number  of  francs  is  given  for  the  pound  sterling ; 
and  the  contrary :  and  when  there  is  a  demand  for  bills  on 
Spain,  a  greater  number  of  pence  sterling  must  be  given  for 
the  dollar  ;  and  the  contrary. 

Again,  if  the  course  of  exchange  between  London  and 
Paris  be  twenty-four  francs  for  the  pound  sterling,  and  if  this 
number  of  francs  contains  the  same  quantity  of  pure  silver 
as  twenty  shillings  sterling,  then  the  exchange  is  considered 
at  par  ;  but  if  Paris  should  give  a  higher  price,  the  ex- 
change is  said  to  be  against  France  and  in  favor  of  England. 
This  is  the  general  mode  of  judging  whether  the  exchange 
is  favorable  or  unfavorable,  though  it  is  not  always  that  on 
which  merchants  act,  or  speculate.  But  before  any  further 
explanation  is  given  of  the  course  of  exchange,  or  the 
causes  of  its  fluctuations,  it  may  be  necessary  to  state  more 
fully  what  is  to  be  understood  by  the  par  of  exchange,  a 
subject  on  which  there  has  been  much  difference  of  opinion. 

PAR  OF  EXCHANGE. 

The  par  of  exchange  may  be  considered  under  two  general 
heads,  viz.  the  intrinsic  par  and  the  commercial  par,  each 
of  which  admits  of  subordinate  divisions  and  distinctions. 

The  intrinsic  par  is  the  value  of  the  money  of  one 
country  compared  with  that  of  another,  with  respect  both  to 
weight  and  fineness. 

The  commercial  par  is  the  comparative  value  of  the 
moneys  of  different  countries,  according  to  the  weight,  fine- 
ness, and  market  prices  of  the  metals. 

Thus  two  sums  of  different  countries  are  intrinsically  at 
par  when  they  contain  an  equal  quantity  of  the  same  kind 
of  pure  metal ;  and  two  sums  of  different  countries  are  com- 


K  Mi  ME  NTS   uf    K\  rfl  A  i\  <;]•;.  J  1 .") 

mercially  at  par  when  they  can  purchase  an  equal  quanti- 
ty of  the  same  kind  of  pure  metal. 

This  latter  equivalence  is  variously  denominated.  It  has 
been  called  by  different  authors  the  current,  the  momentary, 
the  rational,  and  the  eventual  par  ;  and  though  each  of 
these  terms  seems  to  convey  a  correct  idea  of  its  fluctuating 
and  ephemeral  nature,  yet  the  word  commercial  is  here 
adopted  as  being  equally  appropriate,  and  perhaps  more 
generally  understood. 

There  are  other  pars  occasionally  noticed  by  merchants, 
such  as  the  nominal  or  estimate  par,  which,  though  not 
accurate,  is  commonly  referred  to  ;  the  monetary  par,  in 
which  the  current  value,  fixed  by  authority,  is  considered  ; 
the  proportional  par,  which  is  the  equality  of  two  sums  of 
different  countries,  compared  with  the  rate  of  exchange  of  a 
third  place,  and  which  is  also  called  the  arbitrated  price 
and  the  political  par.  There  is,  besides,  a  medium  par, 
sometimes  reckoned  ;  that  is,  a  mean  taken  between  the  pars 
of  gold  and  silver  coins. 

The  intrinsic  par  of  exchange  is,  in  effect,  the  par  of  coins, 
or  the  metallic  par ;  for  though  the  moneys  of  exchange  are, 
for  the  most  part,  imaginary,  their  value  is  ascertained  by 
that  of  the  coins  which  they  represent,  or  to  which  they 
have  a  known  relation,  or  established  proportion. 

An  approximate  or  average  par,  may,  however,  be  com- 
puted from  the  relative  proportions  between  gold  and  silver, 
as  taken  from  the  mint  regulations  of  the  places  in  question  ; 
and  it  may  be  further  observed,  that  the  mint  proportions 
are  considered  the  best  constituted  when  deduced  from  the 
market  prices  of  the  precious  metals,  taken  from  an  average 
of  several  years. 

Here  the  important  question  comes  to  be  considered, 
"  Whether  the  par  of  exchange  should  be  computed  from 
gold  or  from  silver  coins  ?"  Messrs.  Locke,  Harris,  and  other 
authors  of  the  last  century,  agree,  that  "the  equality  of  sil- 
ver expressed  by  different  denominations  of  coins  should  con- 


'i\('>  EL KM EXT*   OF   EXCHANGE. 

stitute  the  par  of  exchange  between  any  two  countries  ;"? 
but  Lord  Liverpool,  in  his  "  Treatise  on  the  Coins  of  the 
Realm"  maintains,  that  the  proper  measure  of  value  should 
be  of  that  metal  in  which  the  principal  payments  are  made, 
and  therefore,  that  in  some  countries  the  par  should  be  com- 
puted from  gold,  and  in  others  from  silver,  according  to  the 
kind  of  money  in  which  bills  of  exchange  are  paid.  In 
England,  however,  gold  has  been  made  the  standard  of 
value,  by  a  law  of  1816,  which  enacts  that  no  payment  in 
silver,  above  two  pounds,  is  a  legal  tender. 

A  difference  of  opinion  has  also  existed  as  to  the  correct- 
ness of  establishing  a  par  between  gold  coins  and  silver  coins, 
as  these  two  metals  are  liable  to  continual  fluctuation  in 
their  relative  prices.  It  is  however  obvious,  that  the  intrin- 
sic par  of  exchange  can  be  determined  only  between  places 
which  pay  their  bills  in  the  same  kind  of  metal.  It  should 
be  even  remarked,  that  the  value  of  the  same  metal  differs 
considerably  indifferent  countries,  which  must  be  always  the 
case  between  two  places,  where  one  possesses  mines,  and  sup- 
plies the  other  with  materials  of  coinage,  as  between  Spain 
and  France,  or  between  Portugal  find  England.  The  dif- 
ference in  such  cases  is  estimated,  in  ordinary  times,  accord- 
ing to  the  expenses  of  transporting  the  precious  metals ;  and 
thus,  from  the  intrinsic  par,  and  the  various  charges  and 
prices,  the  commercial  equivalence  is  computed. 

In  determining  the  intrinsic  par  of  exchange,  another 
question  occurs  ;  namely,  whether  the  computation  should 
be  made  from  mint  regulations,  or  from  assays  ?  The  ob- 
jection to  the  first  is,  that  all  mints  do  not  keep  strictly  to 
their  own  laws  ;  and  to  the  second,  that  there  can  be  no  as- 
surance that  the  coins  to  be  assayed  are  proper  average  speci- 
mens. The  latter  is,  perhaps,  the  least  objectionable,  and 
therefore  a  calculation  from  accredited  assays  is  generally 
preferred.  In  the  present  work  the  computations  are  made 
according  to  both  methods. 


ELEMENTS  OF  EXCHANGE.  247 

COURSE  OF  EXCHANGE. 

The  course  of  exchange  is  the  variable  price  of  the  money 
of  one  country  which  is  given  for  a  fixed  sum  of  the  money 
of  another  country  ;  the  latter  is  called  the  certain^  and  the 
former  the  uncertain  price,  as  before  stated. 

When  London  merchants  want  to  draw  or  remit  foreign 
bills,  they  meet  upon  the  Royal  Exchange,  where  this  kind 
of  business  must  be  transacted.  They  are  distinguished  into 
two  classes,  called  drawers  and  remitters  ;  the  former  are 
also  called  sellers  of  bills,  and  the  latter  buyers  or  takers, 
and  like  buyers  or  sellers  of  all  other  articles,  their  interests 
are  opposite.  The  market  is  constantly  attended  by  exchange 
brokers,  who  generally  bring  the  parties  together,  and  settle 
the  price  of  exchange  for  the  day,  when  they  have  learned 
how  the  market  stands  with  respect  to  the  wants  or  offers  of 
buyers  and  sellers.  It  should  be  observed,  that  the  prices  of 
bullion  and  exchange  reciprocally  determine,  or  at  least  influ- 
ence each  other. 

When  the  market  price  of  foreign  bills  is  above  par,  the  ex- 
change is  said  to  be  favorable  to  the  place  that  gives  the  cer- 
tain for  the  uncertain,  and  the  contrary  ;  thus,  if  the  par  be- 
tween London  and  Hamburgh  be  computed  at  thirty-five 
shillings  Flemish  for  one  pound  sterling,  and  the  course  of 
exchange  is  at  thirty-six  shillings,  the  exchange  is  said  to  be 
in  favor  of  London,  and  against  Hamburgh ;  and  the  con- 
trary of  course  takes  place  if  the  price  be  under  par. 

It  should  however  be  recollected,  that  when  the  exchange 
is  favorable  to  a  place,  it  is  only  so  to  the  buyers  and  remit- 
ters of  bills,  but  it  is  unfavorable  to  the  drawers  and  sellers. 

Thus  the  interest  of  the  remitter  is  identified  with  that  of 
the  place  where  he  purchases  the  bill,  and  the  interest  of  the 
drawer  with  that  of  the  place  where  his  funds  are  established, 
and  on  which  he  draws. 

It  is  natural  to  inquire  why  such  prices  are  considered  fa- 
vorable or  unfavorable,  if  the  drawers  and  remitters,  whose 
interests  are  opposite,  are  natives  of  the  same  country?  The 


248  ELEMENTS  OF  EXCHANGE. 

usual  answer  is.  that  when  the  exchange  is  against  a  place, 
it  becomes  the  interest  of  remitters  to  pay  their  foreign  debts 
in  specie  or  bullion  instead  of  bills ;  and  the  exportation  of 
the  precious  metals  is  often  considered  a  national  disadvan- 
tage. 

The  fluctuations  of  exchange  are  occasioned  by  various 
circumstances,  both  political  and  commercial.  The  princi- 
pal cause  is  generally  stated  to  be  the  balance  of  trade :  that 
is,  the  difference  between  the  commercial  exports  and  im- 
ports of  any  one  country  with  respect  to  another.  Expe- 
perience  however  shows,  that  the  exchange  may  be  unfa- 
vorable to  a  country  when  the  balance  of  trade  is  greatly  in 
its  favor  ;  for  the  demand  for  bills  must  chiefly  depend  on  the 
balance  of  such  debts  as  come  into  immediate  liquidation : 
that  is  to  say,  on  the  balance  of  payments. 

Besides,  it  does  not  follow  that  large  exports  are  always 
successful,  or  quick  in  their  returns  ;  and  even  should  it  be 
the  case,  the  balance  of  "payments  may  be  still  unfavorable 
from  political  causes  :  such  as  foreign  loans,  subsidies,  expe- 
ditions, or  colonial  establishments.  Rich  countries  are  often 
liable  to  have  the  exchange  turned  against  them,  by  the  sums 
which  they  may  have  to  remit  to  less  opulent  states  on  ac- 
count of  their  importations  of  luxuries. 

When  any  alterations  take  place  in  the  coin  or  currency  of 
a  country,  the  exchange  will  of  course  vary,  so  as  to  keep 
pace  or  correspond  with  such  alteration.  This,  however,  can- 
not be  considered  a  change  in  the  price  of  bills  but  in  the 
money  in  which  they  are  bought  or  sold. 

In  times  of  peace  the  course  of  exchange  seldom  remains 
long  unfavorable  to  any  country,  at  least  beyond  the  expenses 
that  might  be  incurred  by  the  transportation  of  the  precious 
metals ;  for  bullion  is  considered  the  universal  currency  of 
merchants,  and  exchange  gives  it  circulation,  and  thus  tends 
to  maintain  the  level  of  money  throughout  the  commercial 
world. 


DESCRIPTION  OF  BRITISH  STOCKS, 

COLLATED    FROM 

VARIOUS   AUTHENTIC   SOURCES, 


AND  REDUCED    TO  THE 


MONEY  OF  THE  UNITED  STATES. 


DESCRIPTION  OF  BRITISH  STOCKS. 


NAVY  Five  per  cent.  Annuities :  produced  from  about  50 
millions  of  stock,  partly  formed  on  navy  bills,  converted,  in 
1784,  into  stock  bearing  interest  at  5  per  cent.;  whence  the 
name.  $222.222,222.22 

Four  per  cent.  Consolidated  Annuities :  produced  from 
about  the  same  quantity  of  stock  as  the  last,  bearing  interest 
at  4  per  cent.,  as  the  title  indicates.  These  annuities  are 
called  consols,  or  consolidated,  from  the  stock  having  been 
formed  by  the  consolidation  of  several  debts  of  government. 

Three  per  cent.  Reduced  Annuities:  produced  by  about 
170  millions  of  stock,  formed  from  several  debts,  that  origi- 
nally bore  higher  rate  of  interest ;  but  which,  on  various 
conditions,  has  been  reduced  to  the  rate  which  the  name  of 
the  stock  expresses.  $755,555,555.55 

Three  per  cent.  Consolidated  Annuities :  produced  by 
about  400  millions  of  stock,  in  part  formed  by  the  consolida- 
tion of  several  stocks,  bearing  interest  at  3  per  cent.  N.  B. 
When  the  word  consols  is  indefinitely  used,  it  is  always  un- 
derstood to  mean  these  annuities.  $1,777,777,777.77 

Three  per  cent.  Imperial  Annuities :  produced  by  about  8 
millions  of  stock  created  by  loans  to  the  emperor  of  Germany, 
with  security  for  the  interest's  being  paid  by  the  government 
of  this  country,  when  the  emperor  should  fail  in  his  engage- 
ment. $35,555,555.55 

Five  per  cent.  Irish  Annuities:  produced  by  about  two  mil- 
lions of  stock,  formed  by  loans  for  the  use  of  Ireland  before 
the  union.  $8,888,888.88 


252  DESCRIPTION  OF  BRITISH  STOCKS. 

Bank  Stock  is  a  capital  of  nearly  twelve  millions, 

$59,333,333.33, 

from  which  the  company  of  the  Bank  of  England  has  accom- 
modated government  with  various  loans,  and  with  wliich  they 
carry  on  the  banking  business,  purchase  bullion,  &c.  The 
dividends  on  bank  stock  are  now  ten  per  cent.  ;  so  that  the 
profits  of  the  company  are  nearly  £1,200,000  per  annum. 

$5,333,333.33 

India  Stock  forms  the  trading  capital  of  the  East  India 
Company.  This  stock,  (six  millions,)  $40,000,000.00, 
produces  a  dividend  of  104^  per  cent,  per  annum. 

$4,200,000.00. 

South  Sea  Stock  Annuities  consist  of  a  capital  of  nearly 
twenty  millions,  $88,888,888.88, 

or  they  are  produced  from  it.  The  greater  part  of  this  was 
lent  to  government,  for  which  the  South  Sea  Company  re- 
ceive 3  per  cent,  but  from  the  increase  of  other  profits,  the 
dividends  to  the  proprietors  are  3  J  per  cent. 

$3,111,111.11 

The  terminable  annuities  are  : 

Bank  Long  Annuities  :  so  called,  from  the  annual  pay- 
ments being,  from  their  origin,  made  payable  at  the  bank, 
and  from  their  being  granted  for  a  greater  length  of  time 
than  other  terminable  annuities.  These  annuities  extend  to 
the  beginning  of  the  year  1860,  and  the  annual  payments 
are  about  1,100,000  pounds.  $4,888,888.88 

Imperial  Short  Annuities :  formed  in  the  same  manner, 
and  upon  the  same  conditions  as  the  Imperial  Three  per  cent. 
Annuities.  They  extend  to  May,  1819,  and  amount  to  up- 
wards of  £320,000  per  annum.  $1,422.222.22 

Besides  the  permanent  loans  to  government,  which  have 
created  the  perpetual  and  terminable  annuities,  various  sums 
have  been  raised  from  time  to  time  as  temporary  loans,  which 
are  called  Exchequer  bills,  from  their  being  made  payable  at 
the  treasury  of  the  exchequer. 


DESCRIPTION  OF  BRITISH  STOCKS.  253 

Exchequer  bills  are  issued  for  different  hundreds  or  thou- 
sands of  pounds,  and  bear  an  interest  of  2%d.  per  cent,  per 
diem,  from  the  day  of  their  date,  to  the  time  when  they  are 
advertised  to  be  paid  off. 

Navy  bills  are  merely  bills  of  exchange,  drawn  at  90  days' 
date,  and  are  given  by  the  commissioners  of  the  navy  for  the 
amount  of  supplies  for  the  use  of  that  department ;  and  the 
interest  upon  these,  amounts  to  3d.  per  cent,  per  diem. 

Omnium  is  a  term  denoting  the  different  stocks  formed  by 
a  loan,  while  any  part  of  the  loan  remains  unpaid.  For  ex- 
ample, suppose  20  millions  of  money  are  to  be  raised,  and  for 
every  £100  in  money,  are  to  be  given  £100  stock  in  the  3 
per  cents.,  £50  stock  in  the  4  per  cents.,  and  6s.  3d.  per  cent, 
in  the  long  annuities ;  then,  if  any  person  engages  to  ad- 
vance £10,000  in  money,  upon  paying  the  first  installment 
(for  the  money  is  usually  advanced  at  the  rate  of  about  10 
per  cent,  per  month,  until  the  whole  is  paid)  he  will  receive 
receipts  which  separately  contain  an  engagement  to  transfer 
to  the  person  possessing  them,  £10,000  stock  in  the  3  per 
cents.,  £5,000  stock  in  the  4  per  cents.,  and  £31  10s.  stock 
in  the  long  annuities,  upon  the  whole  of  the  installments 
being  paid,  at  or  before  the  appointed  time.  While  these 
three  receipts  are  sold  together,  and  before  the  whole  of  the 
installments  have  been  paid,  they  are  called  Omnium,  as  they 
are  made  up  of  all,  or  of  several  of  the  stocks. 

Scrip  is  a  term  given  to  each  of  the  receipts  of  the  omni- 
um, when  they  are  sold  separately  ;  thus  in  the  foregoing 
supposition,  if  the  receipt  containing  the  engagement  to 
transfer  the  £10,000  in  the  3  per  cents.,  be  sold  without  the 
other  two  receipts,  this  could  be  called  a  sale  of  scrip.  Im- 
mediately upon  the  whole  of  the  installments  upon  any 
scrips  being  paid,  the  transfer  of  the  stock  is  made  to  the 
person  who  buys  it,  and  here  is  usually  a  discount  allowed 
for  prompt  payment. 

The  prices  of  the  stocks,  &c.,  are  exhibited  in  the  lists  that 
are  published  in  this  manner. — The  value  of  any  perpetual 
annuity,  thus : 


254        DESCRIPTION  OF  BRITISH  STOCKS. 

Three  per  cent.  Consols,  63{,  64f ,  64£,  signifies  that  the 
value  of  £100  stock  of  these  annuities,  sold  on  the  day  this 
price  was  given,  was  £63  2s.  Qd.  in  money  at  the  beginning 
of  the  market,  that  this  stock  rose  to  £64  15s.,  and  left  off 
£64  10s. 

The  value  of  any  terminable  annuity,  thus  : 

Bank  Long  Annuities,  16| — 16£ :  signifying,  that  any 
annual  payment  of  these  annuities  was  worth  16|  years' 
purchase  at  the  beginning,  and  left  off  at  16£  years'  pur- 
chase at  the  end  of  the  market. 

Exchequer  bills  2,  4  premium  ;  or  India  bonds,  1  or  2  dis- 
count. This  signifies,  that  every  £100  in  exchequer  bills, 
bore  premium  of  2s.  at  the  beginning,  and  advanced  to  4s. 
in  the  end  of  that  day  ;  and  that  every  £100  in  India  bonds 
sold  at  first  at  Is.  premium,  and  afterwards  sold  at  2  discount. 
The  value  of  Omnium  is  expressed  thus  : 

Omnium  3^  premium,  5i  discount:  and  signifies  that 
every  £100  of  Omnium,  brought  a  premium  of  £3  10s.,  or 
sold  at  a  loss  of  £5  10s.  on  the  government  receipts,  for 
£100,  transferred  on  that  day  on  the  stock  exchange. 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below,  or 

on  the  date  to  which  renewed. 
Renewed  books  are  subject  to  immediate  recall. 


•  ^r  •**     • 

KEC'D  LD 

DEC 


9  1353 


LD  21A-60m-4,'64 
(E4555slO)476B 


General  Library 

University  of  California 

Berkeley 


YC  23902 


W2.H5? 


THE  UNIVERSITY  OF  CALIFORNIA  LIBRARY 


'    * 


